Lowering the boom on construction

By Anne Gibson

The construction boom appears to be over, with figures out yesterday showing a rapid downturn in the sector.

Statistics NZ said the value of building work for the June quarter was down 9.1 per cent on the March quarter on a seasonally adjusted basis, following a 3.6 per cent rise.

In the June quarter building work was worth $3.1 billion, down on the $3.3 billion in the March quarter. House building is slowing down most.

Registered Master Builders Federation chief executive Pieter Burghout said the figure could mean the sector would make inroads into the $100 million backlog of house additions and alterations that had accumulated during the building boom.

Builders who had one to two years' worth of work lined up now had six months to a year's worth of work. "It takes workloads to a manageable level," he said.

Statistics NZ said the construction sector finished work worth $12.6 billion in the June year, up 5.8 per cent, or $695 million, on the work completed in the previous year.

Goldman Sachs JBWere economist Shamubeel Eaqub said residential construction plunged by 10.3 per cent in the June quarter, suggesting the long-awaited slowdown was finally gathering pace.

Non-residential building activity (office blocks, hotels, factories, hospitals and schools) fell 5.5 per cent from the March to the June quarters.

"The level of activity in the sector still remains very high by historical comparison," Eaqub said.

"This is consistent with our assessment that the economic downswing is gathering pace.

"The Reserve Bank will be pleased to see the slowdown in house building, which has been a major source of inflationary pressure.

"While this has no immediate implications for monetary policy, we believe accumulating evidence of a slowing economy will be pivotal in shifting the Reserve Bank's focus from inflation to growth," Eaqub said.

The figures appear at odds with data released last week showing that building consents hit a record level in July.

However, those figures related only to the intention to build - while yesterday's data showed work actually begun.

Alan Wilkins, an analyst at Winstone Wallboards, said his firm's wall and ceiling product sales had been gradually declining since early last year.

Statistics NZ gathers the data on building authorisations which comes mainly from builders and property owners.

Going down

House building is slowing down fast.

Builders have less work but there is still a backlog.

Demand for building products is declining.

Auckland house prices have dropped.

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