New homes being built in Richmond. Demand for new homes means there’s a shortage of sections, say local builders.

Section shortage puts pressure on new homes

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A shortage of suitable sections is creating a “bottleneck” for new houses and forcing up the price of land around the region according to three of the region’s biggest home builders.

The Nelson franchises of GJ Gardner Homes, Jennian Homes and Milestone Homes build around 100 new houses each year but all three businesses are predicting a bleak short-term outlook.

It comes just weeks after Nelson and Tasman were confirmed as the two fastest growing region’s in the South Island.

GJ Gardner’s Nelson franchise sales manager Glen Jarvie says the problem is that “developers have not progressed developments over the last two years” and now sections were in high demand. Although there are a number of sections available Glen says many of them are not suitable because they are difficult to build on.

“We are still building flat out now but that will slow down soon,” Glen says. “There is a real bottleneck coming because there is no flat land – we could see it coming six months ago and now it’s coming home to roost. That’s also resulted in the price of sections going up significantly. It’s getting to the stage where the land costs as much as the house – it’s a 50-50 split.”

Managing director of Jennian and Milestone in Nelson, Simon Collett says the shortage has been caused by the increase in demand for new homes that occurred following the end of the global economic recession. That shortage has been compounded by the long processing time it takes for developers to get subdivisions to market’ creating a bottleneck in the number of new homes being built.

“We have just started to get going again on the back of the global economic crisis and now we are facing another challenge. We saw it coming 12 months ago and now it has hit.

“The reaction time for developers to get sections to the market is about 12 months and that’s a long time. The worst thing is that we have clients who want to build and nowhere to put them.”

However, he says there is light at the end of the tunnel with a number of subdivisions coming on stream next year.

Nelson land valuation company Duke and Cook’s residential specialist Barry Rowe says the bad news is that the shortage of sections will not just affect people building new homes. He says it will flow-on to the whole real estate market and force up prices.

“The demand for new houses is there so that will fuel the price of sections and longer term it will affect the whole housing market – prices will go up.”

Barry says there is no “simple fix” to the problem which would only get worse as the region continued to grow.

“The region’s growth is flowing on to all the housing market, not just new homes.’