In last month’s newsletter, we explored the emerging brain drain and the implications for population and the labour force around the regions over the coming year. In this article, we examine projected household growth around the regions, and ask whether we are currently building enough in the right places.
Where we’re building now
Unsurprisingly, most of New Zealand’s new dwellings are being built in Auckland, our most populous city and one of the fastest growing. Over 2018-2022, 41% of new dwelling consents were for Auckland, followed by Canterbury on 15% and Waikato on 11%. Interestingly, despite having similar population growth to Canterbury over this period, Wellington only accounts for 7.8% of national consents.
Over the past decade, there has been a relative shift from Canterbury towards Auckland, as Canterbury’s earthquake recovery started to ease. Auckland’s share of new dwelling construction grew from 32% over 2013-2017 to 41% over 2018-2022, while Canterbury eased from 24% to 15%.
Our households are changing
Our average household size is changing as the age structure of the population shifts. Older age groups typically form one- or two-person households, so as New Zealand’s population ages, the average household size is set to fall. Similarly, trends in fertility such as women having children later in life and having fewer children also have the effect of driving down average household size. A decreasing household size means that we need more houses to accommodate the same number of people.
Our average household size is projected to ease from 2.67 people per household in 2021 to 2.63 in 2031. This decline appears to be a small change, but it means that an additional 29,000 households will form, in addition to those created through population growth. This effect will be more pronounced in regions with a more strongly ageing population.
Where are households growing?
Looking ahead, household growth is projected to slow down around the country, in line with expectations for slower population growth. Auckland is projected to account for 33% of national household growth over the next decade. However, Auckland accounted for 41% of new dwelling consents in the past five years, suggesting that construction activity in the region will not continue at the same fast pace as currently seen in the coming decade.
Canterbury is projected to take 11% of national household growth over the coming decade, compared to 15% of new dwelling consents over 2018-2022. This difference suggests that the Canterbury’s construction sector may need to scale down further from its post-earthquake peak.
Conversely Wellington Region is projected to account for 12% of household growth in the coming decade, but only accounted for 7.8% of new dwelling consents in the past five years, suggesting that the region’s construction sector needs to scale up.
Across other large regions, projected household growth is of a similar share to current building activity, suggesting that less of a shift is needed.
Shift in construction resources needed
Residential construction needs to run ahead of household growth over the long term, to cope with new households, replace dwellings lost through demolition, and account for consents which are abandoned. Consents outpaced household growth by a small margin over 2009-2019, however this period featured sustained strong house price growth which suggests that the margin was not wide enough. Some of this margin also represents the rebuild of earthquake damaged dwellings following the Canterbury earthquakes.
Since 2020, household growth has fallen as net migration fell, at the same time as consents soared, spurred by low interest rates. These trends have driven a temporary widening in the margin between consents and household growth. Household growth is projected to be softer in the coming decade, as national population growth flattens off. This softer growth suggests a lower level of residential construction in the coming decade, even considering the need to address regional housing shortfalls.
What the future holds
This analysis, and our earlier recent pieces on population trends, helps us build up a comprehensive picture of how population growth, and related indicators, might move into the future. We’re now able to deliver detailed population projections to help plan for the future. To find out more about our population and household projections for your region, district or city, please get in touch with Nick Brunsdon. Our Population Projections include detail on population, age structure, household structure and ethnicity, over a 20-30-year horizon.
