House builds at record low, but signs the slump may be over

There are signs the decline in new house building may be over

The trend for the number of new approved housing units, excluding apartments, hit its lowest level on record in April, but there are signs the decline is easing.

Releasing the data today, Statistics New Zealand (SNZ) said the trend had fallen 55 per cent since its recent peak in June 2007 and was at its lowest level since the series started in 1992.

But the trend was starting to shows signs of easing, SNZ said.

Last month 1009 consents were issued for new dwellings, including 199 apartments.

Seasonally adjusted, the number of new dwellings authorised, including apartments, rose 11 per cent in April after falling 1.7 per cent in March.

Excluding apartments, the seasonally adjusted number of new dwellings authorised rose 4.5 per cent last month, after falling 0.4 per cent in March.

With a boost from development at Christchurch International Airport, the value of non-residential consents reached $530 million in April, the highest since the series started in 1965.

The value of residential building consents in April was $355m, 45 per cent lower than a year earlier.


Darren Gibbs, chief economist at Deutsche Bank has been arguing recently that the improvement seen in activity levels in the existing housing market, triggered by historically low mortgage interest rates and perhaps increasing migrant inflows, "boded well for a recovery in residential construction later this year - one that was likely to surpass generally pessimistic expectations."

"In our view, that recovery may now be underway," said Gibbs.

Based on past relationships with existing house sales, it seems likely that dwelling consent numbers would now trend higher over the remainder of this year, said Gibbs.

Consequently the bank had brought forward its forecast of the timing of the recovery of residential construction activity, which Gibbs said was likely to turn positive in the third quarter of this year.

"Combined with a likely modest strengthening of retail spending over coming months, it is possible that growth in the overall economy could return to positive territory in Q3," said Gibbs.

ASB economist Jane Turner was not quite as optimistic, saying she expected housing construction would continue to contract over the first half of 2009 and start to stabilise over the second half of 2010.

"Residential consent issuance is now starting to bottom out and is likely to improve further over the next few months, in line with the pick up in house sales. The turn around in population growth, stabilising house prices and lower interest rates are likely to help lift construction demand off its lows," said Turner.

"Nonetheless, economic uncertainty and rising unemployment are likely to be factors that will limit the degree of recovery in housing construction."

For the year to the end of April, residential building consents valued at $5.3 billion were issued, down 31 per cent or $2.4b from the April 2008 year.

For non-residential buildings the value of consents for the year was up 3.2 per cent to $4.6b.

For all buildings, the value of consents issued in April was down 21 per cent from a year earlier to $885m, while for the year the value was down 18 per cent or $2.2b to $10b.

- NZPA