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Intensive urban development opportunities tempered by developer caution

The National Policy Statement on Urban Development 2020 (NPS-UD) sets stronger density requirements in Tier 1 urban areas which include the main centres and larger regional hubs such as Hawke’s Bay.

As well as increasing the number of residential units on brownfield and greenfield development sites, the policy statement also allows for larger builds on smaller sites and frees developers from car parking requirements.

Bayleys land sales specialists say that at first glance the NPS-UD offers greater scope for developers to intensify their projects and potentially maximise their value. However, they believe an immediate construction free-for-all is unlikely as developers and investors test the practical application of the new rules against market demand, the availability of investment and infrastructure pressures such as transport and wastewater.

Gerald Rundle

Bayleys Development Land Sales director Gerald Rundle says developers will certainly see the potential in increasing the intensification of their existing or planned sites within urban boundaries, but decisions will still need to be market driven.

“Just because you can provide higher-density housing, doesn’t mean the market wants it. Good examples are the areas around Auckland that are zoned for terraced housing and apartment buildings (THAB) where the preference is still to build three-level terraced houses,” Rundle says.

He adds that many sites, particularly brownfield areas, won’t have the services necessary to allow for higher density in the short term. “Developers are looking at the opportunity from the NPS-UD against things like will the pipes be good enough? Will there be issues that come from everybody parking on side streets?

“It sounds great, but there is a lot to consider and the advantages could be very site specific.”

Funding is one factor that could prevent wholesale changes to the number and types of intensive development undertaken as a result of the NPS-UD.

Kevin Miles

Kevin Miles, commercial finance specialist for Vega, Bayleys’ preferred and 50-percent-owned mortgage broking business, says securing presales that meet development funder requirements in a softer market where well-built stock is readily available will be increasingly important.

“Where once you might have had people queuing round the block to buy off the plans, now they’re hard to find. Plus, some funders are now looking closely at the designs to determine whether they are going to appeal to a broad market where there is choice.”

The planning changes have motivated Bayleys to put together dedicated Development Land Sales and New Builds teams with representatives around the country to help buyers and developers navigate the new rules. The Development Land Sales team works with Bayleys residential specialists, to ensure developers are fully supported from the start of their land search to the sale of finished units.

“It’s important to have a specialist team for new builds in this environment. It helps owners and developers understand the opportunities their properties may have.

“We can advise them on how to add the most value without over-investing trying to achieve it,” Rundle says.

On its website, the Ministry of Environment describes the NPS-UD as being “about ensuring New Zealand’s towns and cities are well-functioning urban environments that meet the changing needs of our diverse communities. It removes overly restrictive barriers to development to allow growth ‘up’ and ‘out’ in locations that have good access to existing services, public transport networks and infrastructure”.

Wesley Gerber

Bayleys Development Land Sales associate director Wesley Gerber says the policy will allow for better utilisation of land, not just in allowing more homes, but bigger homes on smaller sites and in how it impacts things like height in relation to boundary, site coverage and outlook.

“It is still quite early days, so it’s hard to predict exactly how things will play out, but developers will definitely be factoring it in as they look to acquire land for developments,” Gerber says.

He cites Auckland’s Hobsonville Point as a good example of the types of high-density development that will be increasingly possible via the NPS-UD and will be aimed at urban families looking for low-maintenance homes with communal public areas that they don’t have to maintain themselves.

“The way we live is changing. These types of development reflect that and there is a huge push from the government for increased density, but developers will still be having conversations about just what the market is for it,” Gerber says.

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