Just how much is your investment property worth? You’ve taken into account the renovations you’ve made plus the value of surrounding properties. But have you checked out how many building consents have been issued in the area?

If you have worked around property for some time, you probably know that a building consent reflects an intention to build. You have to apply to your local council to build or renovate a property. The council then checks your plans to make sure your builder is using proper materials, the plan is solid and everything is up to code. Each month, Statistics NZ release details for all the building consents granted from around the country.

The data can be broken down further. In March 2016 a total of 2,313 building consents were issued around New Zealand. 1,815 of those were houses, 334 townhouses or flats, 134 retirement village units and 32 apartments. If you want, you can visit www.stats.govt.nz to see how those figures compare for the year to date, for that same month in previous years, or how many of those consents came from your area.

Why are the number of building consents issued important?

When you break it down, buying an empty section and building a house requires a lot of money. During economic lows or depressions, people generally want to hold on to that money and pay for the essentials they need. A high number of building consents being issued usually reflects confidence in New Zealand’s economy - hence why the number of building consents issued for an area are an important metric for those investing in rental properties.

Few consents going through will often push property values higher, because there is not enough supply to meet the demand. In 2013, the Christchurch City Council nearly lost its ability to grant building consents because they weren’t processing enough. Two years after the devastating February Earthquake, people and businesses were trying to rebuild and the council was swamped with so many consents it just couldn’t cope. Without consents, you can’t build, and no building taking place was putting pressure on local businesses, the region’s and nation’s economy. As a result, rental prices went through the roof as more people competed for temporary and permanent accommodation around Canterbury.

Read more: The role of median rental rates when buying an investment property

In 2016 Auckland is currently experiencing its own housing crisis and has been for some time. Simply, there are more people who want to live in Auckland than there are houses available. It’s estimated the Auckland City Council needs to issue 13,000 new building consents each year just to match population growth, but in the year to January they only managed 9,275.

You shouldn’t base buying or building your next investment property on building consents alone. For example, while the number of consents in Auckland is going up, values are still rising as it’s not enough to meet demand. Instead the number of building consents being issued should be considered as just one more useful indicator regarding:

• Whether to build or buy a new investment property, or
• How much you can be charging for properties you currently own.

The more tools that you have at your disposal, the better the picture you will have of the property market and best to plan to move forward.

Download our A-Z guide is a handy guide to help you navigate the property investment world, and make buying, leasing, and selling homes that much easier: