Auckland's soaring property prices blamed for Mill Rd cost blow-out

4:02 pm on 4 June 2021

Auckland's overheated property market has been blamed for the massive cost blow-out of Auckland's Mill Rd project.

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Photo: Jarred Williamson / Stuff

When the government announced funding for the Waka Kotahi NZ Transport Agency-led project in January last year, as part of the $12 billion NZ Upgrade Programme, it was expected to cost $1.35b.

On Friday, Wood confirmed that the cost could now be as high as $3.5b, with the supercity's property prices and the required property purchases contributing to the blow-out.

As a result, government funding would now focus on targeted safety upgrades to the northern section of Mill Rd and investing in walkways, cycleways and public transport in the wider Drury area.

The 21.5km Mill Rd arterial route was expected to provide an alternate road between Manukau and Drury, running parallel to the east of State Highway 1. Construction was expected to start in 2022 and be completed by 2028.

Wood said it decided to take another look at the NZ Upgrade Programme's funding as a result of increased costs and its own climate commitments.

"If we had proceeded with Mill Road as originally scoped, it would have cost up to $3.5b and at peak produced six tonnes of CO2 emissions a day," Wood said.

"Recognising the need to decarbonise our transport system, we're rebalancing the package to increase investment in rail, public transport and walking and cycling.

"Instead, we've focused on delivering important safety improvements to Mill Road, upgrades to SH1 and rail, and new rail stations connected to public transport, walking and cycling infrastructure. This rebalanced package helps manage debt, reduces emissions and supports housing growth."

Manurewa-Papakura ward councillor Daniel Newman was critical of the government's decision to scale back the Mill Rd project.

Transport Minister Michael Wood announces a new unit will lead a review of the Auckland light rail project.

Transport minister Michael Wood Photo: RNZ / Dan Cook

"This government isn't serious about ensuring that we have a roading network that is fit for the future in Auckland. And I think it is using climate change as an excuse to dial back on critical infrastructure like Mill Rd," he said.

"I'm not surprised at the cost blow-out because it's an enormous project that will include the cost of acquiring properties and the land is expensive in Auckland.

"But it needs to be done and if they don't get under way with it at $3.5b the cost of buy-backs will only continue to rise."

Auckland Deputy Mayor Bill Cashmore has been one of Mill Rd's strongest advocates and said he was not surprised by the government's announcement.

The Franklin Ward councillor said increased property prices and construction costs have meant the project needed to be reviewed.

"So it's a pragmatic solution," Cashmore said. "I wouldn't have been as kind [to the government] if they had canned the whole project.

"It was always going to have to be done in stages," he said. "But ideally at some point in the future it will have to be completed."

Economist Tony Alexander said he was not surprised that the cost of land has impacted on a major infrastructure project like Mill Rd.

"The price of one of the key inputs has gone up and the government probably can't do some of the projects it wants to because of debt constraints," he said.

"This is obviously a bigger percentage increase than we are used to seeing. And it isn't something we are used to seeing for these sorts of projects, it's always been the cost of other things.

Alexander, who was formerly chief economist at BNZ, said increased construction costs, which are being seen around the world, will also have played a part.

"But if you need land, it's got to be available and if you want it you've got to pay for it."

In a statement, Auckland Mayor Phil Goff said while some projects had been scaled back, there were also some big wins for the city in Friday's announcement.

He welcomed the extra investment going into rail services, with an additional station confirmed at Paerata, electrification of the rail system to Pukekohe, as well as a third main rail trunk line from Wiri to Quay Park locked in for the south.

"Additional money will go into transport infrastructure in Drury and will help unlock the provision of more housing."

In March, climate change advocates All Aboard Aotearoa applied for a judicial review of the Waka Kotahi NZTA led project in the Wellington High Court.

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