Building slump accelerating, say new figures

The slump in house construction is speeding up, says Stats NZ

The slump in house building continued for a fifth consecutive quarter in the three months to December and the decline is accelerating, new Statistics New Zealand (SNZ) figures show.

In the latest quarter the volume of residential building work fell 13.4 percent, the largest fall in eight years.

The volume was now 32.5 percent lower than in the September 2007 quarter, the last time it rose, SNZ said today.

Residential building work put in place in the quarter was the lowest since March 2002.

The trend indicated the rate of decline in the volume of residential building work was increasing, having fallen by nearly a third in the latest five quarters, SNZ said.

Seasonally adjusted, the value of residential building work, in current prices, fell 13.4 percent in the December quarter.

UBS NZ senior economist Robin Clements said today's data was weak, but in line with expectations.

"The dwelling consents data suggests that the contraction in residential building activity is not over. Indeed, dwelling consents point to another fall in building work for Q1 of a similar magnitude to that of Q4."

The poor figures expected for the first quarter of this year is a "key reason why we have another contraction in overall economic activity," said Clements. This meant a fifth quarter of economic recession.

Jane Turner, an economist at ASB Bank said that the issuing of non-residential consents remained robust, "although given the swift change in the economic climate since October 2008 we expect that some of these consented projects may not proceed."

"We expect the housing sector to remain under considerable pressure despite the dramatic drop in interest rates," said Turner. "House prices continue to fall, reducing incentives to build. In addition, rising unemployment, slowing income growth and weak levels of household confidence will also weigh against housing construction."

The building work figures were a key piece of data used by the economists to firm up their GDP forecasts.

"Today's number was slightly better than we had expected, however we continue to expect a large declines in GDP over Q4 2008 and Q1 2009," said Turner.
The bank's preliminary forecast for GDP in the fourth quarter were negative one per cent.

For the 2008 calendar year, the unadjusted value of residential building work put in place was $7.32 billion, down 14.2 percent on the previous year.

The volume of non-residential building work rose 1.6 percent in the December quarter, seasonally adjusted, following a 5.2 percent rise in the previous quarter.

The adjusted value of non-residential building work, in current prices, rose 1.7 percent in the December quarter.

For the 2008 calendar year, the unadjusted $5.22b of non-residential building work put in place was up $188 million, or 3.7 percent, from the previous year.

The value of miscellaneous non-residential buildings rose $182m or 12.7 percent to $1.61b for the year, with education buildings up $104m to $618m, and commercial buildings up $41m to $1.69b.

Accommodation buildings were down $101m to $413m, with hospitals and nursing homes down $11m to $442m, and factories and industrial buildings down $26m to $447m.

Seasonally adjusted, the volume of all building work fell 6.5 percent in the December quarter, the fourth successive quarterly fall, while the value, in current prices, fell 7 percent.

For 2008, the unadjusted value of all building work put in place was $12.54b, down 7.5 percent from the previous year.

- NZPA/HERALD ONLINE