KEY POINTS:
Momentum in the building sector is beginning to wane, building consents data show, and economists say the trend could be exacerbated by fallout from the troubled finance sector.
Statistics NZ said yesterday that residential building consents were down a seasonally adjusted 16 per cent in July from the
month before, but non-residential consents held firm.
The change in residential consents was blamed largely on the volatile apartment component. Excluding apartments, dwelling consents were down 1.4 per cent.
Non-residential consents remained robust, with values rising 25 per cent annually, which economists said reflected solid supply and demand in the sector.
UBS economist Robin Clements said the residential sector's decline could be hit by ongoing issues in the finance sector.
"Recent global financial market volatility and closer to home the announcement of the seventh finance company to be in difficulties in 18 months has the potential to reinforce these downward pressures," Clements said.
Daniel Wills, treasury economist at ASB, said higher interest rates were beginning to bite.
"[These data reinforce] recent real estate data suggesting some moderation in the housing market over the past few months as Reserve Bank tightening begins to bite and net immigration has softened," he said.
"The Reserve Bank will be looking for further evidence of housing market moderation, and corresponding downtrend in household spending growth, over coming quarters.
"[The data reinforce] our view that the first Reserve Bank cut is unlikely until late 2008, as the bank awaits firm evidence of a downtrend in domestic spending-related inflation pressures," Wills wrote.
Deutsche Bank chief economist Darren Gibbs said the residential consent data had been skewed somewhat lately by the sector trying to beat rising costs.
"Dwelling consent issuance spiked up 14.2 per cent month on month in June as developers - especially in the apartment sector - rushed to beat fee increases that took place on July 1. Therefore, it was no surprise to see Statistics NZ report a sharp fall in dwelling consent issuance in July," he said. Deutsche Bank thought consents could have fallen even more. The total value of all consents issued in July was $1.06 billion, up 13.7 per cent year on year.
Ashley Hartley, president of the Registered Master Builders Federation, said the data showed the construction market was in a stable phase.
"This month's decrease in apartment consents showed that people were building higher-quality, standalone residential properties.
"This bodes well for our builders and the industry as a whole."
