Home building consents fell for the first time in three months in March, but house building is still running at a swift pace and continues to push inflation, economists say.
In the first set of building consents data to capture the the Reserve Bank's official cash rate rise in March, new home building consents dropped slightly, falling a seasonally-adjusted 2.9 per cent in March after a 6.4 per cent gain in February.
However, Shamubeel Eaqub, investment research director at Goldman Sachs JBWere (NZ), said it was too early to say whether this year's two rate rises aimed at cooling the housing market have had any effect. "Due to lags in consent processing the March figures are not likely to show the impact of interest rate increases in March and April," he said. He expected consents to slow but said this trend would probably not show up until later in the year.
Despite the monthly drop, house-building is continuing at a swift pace with builders getting consent from councils to put up 25,740 new houses and apartments nationally in the year to March, according to the data issued yesterday by Statistics New Zealand.
That was 334 more than in the 12 months to March last year.
Pieter Burghout, chief executive of the Registered Master Builders Federation, said: "The increase in the value of consents continues the trend we have seen in recent months where the quality end of the housing market remains strongest overall.
Despite slightly fewer consents authorised in March compared to this time last year, the residential building industry continues to be positive," he said.
Daniel Wills, ASB's economist, said: "Construction cost inflation remains strong. Current high levels of activity continue to pressure stretched capacity in the building sector."
Demand for more housing could be being artificially suppressed by red tape.
"Anecdotes of slow processing times in some areas suggest that these figures could be understating construction strength," he said.
Bank of New Zealand chief economist Tony Alexander said the boom was nowhere near as strong as in some other periods.
During the early 1970s, builders were putting up 40,000 places annually, he said. British and Pacific Islanders migrated for the massive opportunities when large new subdivisions were created.
House building has been running at much higher levels this decade than now.
"In the year to June 2004, 33,000 houses were built, Alexander said.
The latest figures showed the sector was on target to match a 10-year average of 25,235 new residential consents, he said.
"So it's just chugging along at average levels.
"I think the numbers will remain acceptable. They're not going to rise all that much," he said.
However, he noted Real Estate Institute data showing a 14 per cent jump in dwelling sales and said that could spark higher residential building levels because of the correlation between residential sales and building consents.
Jarrod Kerr, an economist at JPMorgan in Sydney, said he expected the residential building sector to be subdued this year because of higher interest rates and reduced migration.
Statistics NZ said the value of non-residential building consents was up last month by $45 million.
The largest increase was in the office and administration sector, followed by shops, restaurants and taverns.