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Greener pastures

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A critical policy battle is being played out across New Zealand’s urban fringes, with upcoming changes directed by the new government likely to have implications for lifestyle property owners.

Small yet meaningful changes in the government’s policy stance on greenfield development could be important for lifestyle property owners, particularly those with greenspace around rapidly expanding urban fringes.

Areas like Whenuapai in Auckland, Rotokauri in Hamilton, Wharewaka in Taupō, Waimakariri in Canterbury, and Western Bay of Plenty swathes could change under the new government’s directives.

New regulations could supersede vague determinations like ‘Future Urban’ area categories and will require most of New Zealand’s regional councils to immediately zone 30 years worth of developable housing capacity with potential impacts on the value of upzoned landholdings.

DEVELOPING STORY

Greenfield development – the process of building on previously undeveloped or open land – provides a necessary opening for new housing and amenities, particularly important given New Zealand’s net migration gain, a record 128,900 for the year ended October 2023.

Comparatively lower land costs on the outskirts of urban areas and rural settings have made this development vehicle an attractive answer to our worries around housing supply, with new homes being built at virtually all compass points across the country.

Greenfield projects are a favourable mode of residential development, requiring less investment to clear existing structures and remediate contaminated land, which can be expected in previously utilised locations.

However, it has become a divisive political issue, raising questions about protecting some of our most valuable growing soils in country areas.

Central public service, the New Zealand Treasury, which advises the government on economic policy, has noted the outgoing government’s initiatives under the National Policy Statement on Highly Productive Land (NPS-HPL) legislation, had the potential to hurt housing affordability by constraining ready-available land for development.

The NPS-HPL provides discretion to improve how highly productive land is managed under the Resource Management Act and classes land use according to alternative purposes, including agriculture, horticulture and high-value farming activities.

Under the new legislation, properties with limitations for agricultural activities, better suited for forestry, grazing and residential uses could be earmarked for development, creating new opportunities in rural areas.

THE UPSHOT

The policies that encourage densification have various flow-on-effects for local landowners.

In key rural areas, the introduction of ‘development potential’ may contribute to an increase in land values, providing an additional dimension to the overall value proposition of properties for residents.

We’ve seen it before, following extensive ‘upzoning’ of Auckland under the Unitary Plan, as greater density controls unlocked land potential, creating heightened competition for development-viable land sites.

At the same time, internal migration patterns indicate our big cities are losing residents to periphery areas, such as Wellington to Kāpiti and Christchurch to Selwyn, as Kiwis search for a balance of lifestyle and affordability in an increasingly more agile employment market.

The development of previously rural areas will deliver new infrastructure and new amenities such as healthcare and schooling, with enhanced town centres increasing the desirability of these locations for a new population.

Furthermore, greenfield development is held to modern efficiency standards, with urban planning and design that emphasises sustainability and environmental considerations.

This delivers a better quality of life for residents as they benefit from masterplanned community settings rather than piecemeal development tacked on over successive projects.

THE PROBLEM

New Zealand continues to fight a battle against successive underinvestment in ageing infrastructure.

Kiwis saw it as the rain heaved over their cities during Cyclone Gabrielle, and we see it with potholes, leaky pipes and sinkholes, particularly evident after extreme weather events.

This is important because infrastructure funding mechanisms are the sticking point between policymakers and a critical reason for New Zealand’s resource deficiency.

Regional councils are grappling with the ability to fund infrastructure projects because borrowing capacities are at maximum allowances, and existing revenue tools have been exhausted.

Solutions proposed by the new government include an overhaul of the Infrastructure Funding and Financing Act (IFF), allowing a portion of GST collected on new residential builds to be shared with local councils, and providing development incentives for home builders who can ease liability burdens on regional councils.

At the same time, integrating supplementary financial mechanisms, such as private-public partnerships (PPP) and specific levies, could mitigate the need for local councils to rely solely on their ledgers to fund greenfield infrastructure.

This approach would, in turn, reduce the direct impact on existing ratepayers, including lifestyle property owners in evolving neighbourhoods.

The new government has also proposed a $1 billion Build for Growth fund to see regional councils earn $25,000 for every dwelling consented to above the five-year regional average.

According to its housing manifesto, the National Party says if this policy were in effect, Auckland Council would have qualified for a payment of $152 million last year. The financial injection would have bolstered the council’s balance sheet, providing further resources to address its growing pains.

Bayleys’ residential and lifestyle sales divisions across the country will keenly observe developments in this space, focusing on the expedited infrastructure consent procedures in specific regions.

Given the enduring value of land and imbalanced supply-demand dynamics amid rapid population growth, landowners nationwide stand to gain from prospective development opportunities and the increasing scarcity of extensive land parcels on the outskirts of urban precincts.

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