Demand for new houses drives up consents

Consents to build new dwellings continue to recover from their trough in March last year but issuance is still running at only about three-quarters of the levels prevailing during the housing boom.

New dwellings authorised in November, excluding the volatile apartments sector and adjusted for seasonal effects, were 3.1 per cent higher than in October, Statistics New Zealand reported and were back at levels last seen in May 2008.

The trend in consents issuance troughed last March at levels around half those prevailing between 2002 and 2007. Since then they have recovered about half that decline.

November's 3.1 per cent increase came on top of a seasonally adjusted 11 per cent rise in October.

The track for building consents has mirrored house prices, which dropped 10 per cent from their peak in late 2007, as measured by Quotable Value's index, and have since recovered half of that decline, albeit on low volumes.

QV's valuation manager Glenda Whitehead said vacant land sales had dropped dramatically in 2008 to the lowest level since 1980 but, like residential building consents, had trended upward again last year.

"As the market fell it simply did not make economic sense to purchase vacant land and build a house on it. Furthermore, finance became much harder to secure, particularly for speculative developments," she said.

"The slight recovery in 2009 is fuelled by building to meet genuine demand. There is, however, a long way to go before this part of the market returns to levels seen previously," she said.

Demand for housing has been boosted by a surge in net migration as a lot fewer people leave for Australia.

In the year ended November 2009 the net inflow of migrants was 20,000, compared with just 3600 the previous year, reflecting a steep drop in the net outflow to Australia which fell to 19,500 from 35,300 the year before. "As the economic recovery broadens we expect a further substantial increase [in issuance] will be recorded over 2010 and into 2011, boosted by still low short-term mortgage rates and strong population growth," Deutsche Bank's Darren Gibbs said.

Meanwhile the value of consents for non-residential building was the highest since last May.

The largest increase was for hospitals and nursing homes. Even so, for the three months ended November the value of non-residential building consents was down 18.5 per cent on the same period last year, Gibbs said, reflecting weak demand for new building by the private sector.

This week's NZIER quarterly survey of business opinion recorded a lift in confidence in the building sector, but the responses on new orders and output are only just in neutral territory, where as many firms are going forward as are going backward.

UBS economist Robin Clements said that while yesterday's consents data did not contain any revelations for monetary policy, the recovery reflected in the numbers should add to confidence that the economy is on a "solid footing" and moving towards "self-sustained growth" - conditions the Reserve Bank is looking for to begin withdrawing monetary stimulus.

ON THE RISE

* New homes authorised in November, excluding apartments, rose 3.1 per cent.
* That follows a rise of 11 per cent in October.
* Demand for housing has been boosted by a surge in net migration. In the year ended November 2009 the net inflow of migrants was 20,000, compared with 3600 the previous year.