See below a summary of the biggest trends within New Zealand’s development land market, plus an outlook on the next 12 months for the market.

Biggest trends

Land prices soften after a big boost

Persistent shortages of development land have led to substantial growth in land prices over the past decade. The downturn across the property markets has weakened demand and softened prices for land, although prices for land in highly sought-after locations have been surprisingly resilient.

Infrastructure remains a challenge

Infrastructure constraints have been a major challenge for developers in delivering land and completed buildings to the market. The new government’s focus on cutting red tape may help with the supply of developable land in the longer term, but the time and cost to make improvements mean this will remain a challenge in the short-term.

Feasibilities struggling

Lower values for completed assets and elevated construction costs mean feasibilities are difficult to stack up in the prevailing market conditions. This is translating to weaker demand for development land.

Outlook for the next 12 months

Prices for completed assets stabilising

Signals that inflation and long-term interest rates are peaking means asset prices are likely to stabilise after a period of softening. The residential market appears to have hit its floor and is showing signs of recovery. Low turnover in the commercial property market means trends have been harder to gauge.

Construction cost relief on the horizon

Industry commentators are increasingly of the view that construction costs are starting to reduce. Costrelief is primarily being seen in labour costs, with material costs remaining elevated. Smart design and planning remain critical to achieving cost efficiencies and enabling feasibilities to stack.

Migration building up demand

Surging migration is adding pressure, particularly within the housing market. This is mainly impacting the rental market given migrants tend to rent first and will typically be subject to the foreign buyer ban. Rising rents will encourage more activity by investors.

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