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The last few years have seen acknowledgement of the benefit medium-density housing can deliver for residents.

By alleviating further sprawl, MDH is seen as a growth management tool for protecting productive land and reducing the need for new infrastructure in towns and cities. It does, however, increase demand on existing infrastructure as more residents are brought in to a given area. It is also seen as a mechanism to assist with the issue of housing affordability.

As a result, an increasing number of local and regional councils have developed MDH strategies and policies to shape their future growth. Medium-density developments are usually targeted for locations where shopping centres and nodes, prominent public transport corridors and other types of key infrastructure are easily accessible.

Housing demand and identification of future housing trends are core elements in determining if current and future housing supply are on track to meet the needs and preferences of residents.

Since the 1960s, as growth pressures increased in the main centres, intensification significantly shaped the urban form of New Zealand’s cities. Levels of growth and growth patterns have been different in different areas.

MDH21 construction

Growth pressure in the main centres has contributed to urban intensification for several decades.

Auckland has seen the most widespread growth and expansion of residential development into rural land across its metropolitan area, including a surge in the intensification of city-fringe suburbs since the 1980s.

Wellington has seen considerable intensification through both suburban infill and downtown apartment development (both new apartments and the conversion of existing commercial buildings) in the central city. The broader metropolitan area of Wellington remains relatively low density.

More recently, the urban form of Christchurch has been enormously affected by the 2010 and 2011 earthquakes. Although newer subdivisions with some integrated MDH have occurred, the number of apartments 4 storeys or above has decreased by two-thirds in the central city.

A greater variety of MDH developments, such as terraced housing and low-rise apartments, have been occurring in each of these centres. However, in many cases, they have not met the intensification targets set out in the relevant strategies and policies.

The growth of MDH has sharply increased in the last few years, however, as data from Stats NZ makes clear. In 2021, multi-unit homes accounted for 48% of all homes consented, up from 36% 3 years earlier and 30% 5 years earlier. In the Wellington region, over half the new homes consented are now multi-unit homes. In Auckland, two-thirds of all new homes consented are multi-unit homes.

There has been a lower need for intensification in smaller towns, although many are introducing or increasing provision for MDH. In April 2021, for example, a council committee in Carterton (town population approximately 5,800) voted to incorporate residents’ support for both low-density and medium-density housing into a plan to expand the town. 

Demand for MDH

 

The 9th National Construction Pipeline Report released at the end of 2021 predicts that multi-unit building consents will peak at 21,300 in 2022, slightly earlier than the estimate for detached dwellings, which are expected to peak at about 26,500 consents in 2023. 

Among multi-unit dwellings, the report expects that much of the growth will be in townhouses, with an anticipated increase of 2,250 consents above the 2020 figure. The apartment market is expected to grow by 1,200 consents above the 2020 figure and the retirement village market to increase by just over 670 consents.

Housing affordability is difficult for many households and will continue to be. Generally, apartments cost more per square metre to build (and city centre land is more expensive), because at 3 storeys and above, they are usually concrete and/or steel construction. The most affordable units for median-income households are likely to be flats and 2-storey terraced houses on the city fringe and outer suburbs, constructed mainly from light timber framing.

Preferences for MDH

New Zealand’s changing demographics and lifestyle preferences have seen the introduction of liveability and quality-of-life goals as fundamental components of many growth management strategies across New Zealand. Following international trends, the idea that quality of life can be maintained or enhanced by living at increased densities has also come to the forefront.

Perceptions of MDH are also shifting as the market delivers more new builds of different types and spatial configurations. It is also increasingly being acknowledged that, because MDH is a diverse category of housing, it suits a wider range of people with differing lifestyle preferences.

Housing experiences also play a big role, with residents more likely to accept a greater range of housing types if they have had prior experience of living in similar types of housing. Access to urban amenities – such as supermarkets, retail outlets, schools, parks, recreational facilities and professional services – also has a strong role to play in quality of life and neighbourhood satisfaction.

Resident demographics

Housing preferences vary depending on the income, life stages and lifestyle expectations of residents. Security, outdoor entertaining spaces and storage for key life acquisitions are three factors that strongly affect housing preferences. Location preferences and the quality of the development are also an important aspect of housing preferences.

Residents who are likely suited to MDH stock include first-home buyers, young professionals, students, families with children, single-parent families, retirees and empty-nesters.

In a 2016 report, Gray Partners Limited noted several demographic groupings currently inhabiting MDH:

Professional couples and singles are the mainstay of the suburban multi-unit housing market, including first-home buyers who are able to take advantage of lower deposit requirements for new-build housing.

There is also strong interest in medium density housing from investors, especially in areas where net yields are accompanied by strong prospects for capital growth.

Post-family households looking to downsize from an existing home are also represented strongly in areas where they can trade down from their existing home and free up capital for other uses.

Family households (generally two parent families with one or two small children) make up only a small minority of current multi-unit housing purchasers, and are mostly first-home buyers.

A significant proportion of recent multi-unit sales in suburban and inner residential areas appear to be to new New Zealanders (first and second generation New Zealanders), perhaps reflecting high levels of external migration over the past fifteen years.

To understand the market for MDH, it’s important to consider how each factor influences this demographic and the trade-offs they’re prepared to make when choosing where to live.