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 zoned and serviced land have led to substantial growth in land prices over the past decade. The downturn across the property markets has weakened demand and softened land prices, though prime locations continue to hold their value.

Infrastructure remains a challenge

Infrastructure constraints have been a major challenge for developers in delivering land and completed buildings to the market. The 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 difficult

With lower completed asset values and subdued sales activity, development feasibilities remain difficult to stack up. Developers are increasingly looking to nonbank lenders for funding due to the greater flexibility that can be offered.

Outlook for the next 12 months

Turning point in the market

With interest rates beginning to ease, investor confidence is returning as agents report more enquiry. The residential market appears to have reached its floor, with early signs of recovery. Anticipation of price growth will help to clear excess stock and achieve project pre-sales. Subdued transaction activity in the commercial property market means value trends have been harder to track.

Construction cost relief on the horizon

Industry commentators are increasingly of the view that construction costs are starting to reduce. Cost relief 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.

Developers pivot to the regions

More developers are looking to regional areas for new opportunities. This is typically driven by these markets performing comparatively better over recent years, alongside the perception that these areas are easier to operate within for consenting and infrastructure. Queenstown-Lakes District, Hamilton and Tauranga have benefitted from this shift in focus.