KEY POINTS:
Building consents are falling sharply and even the home alteration market is not seen as a safe haven in the downturn.
Statistics NZ revealed a 42 per cent dive in the number of new houses and apartments approved since the middle of last year.
For the year ended
August 2008, the authorised number of new dwellings including apartments fell 20 per cent, new dwellings excluding apartments fell 18 per cent and the number of new apartments approved fell 33 per cent.
The value of authorised residential building consents was $457 million in August 2008, a decrease of 40 per cent compared with August 2007. The value of commercial or non-residential building approved was $362 million in August, down 9 per cent since August last year.
Deutsche Bank chief economist Darren Gibbs took a grim view of the latest numbers, saying residential additions and alterations were suffering along with new-house starts.
"The softening in new building activity seems to be filtering down to work on alterations and additions, the value of which was down 8.4 per cent year-on-year in the three months to August," he said.
House building costs are rising too, up nearly 6 per cent a square metre in the three months to August.
"The total value of all consents issued in the three months to August fell 20.8 per cent year-on-year, a strong decline especially considering ongoing inflation in the construction sector. We expect that a very sharp decline in construction and related activity will be a sizeable drag on overall economic activity and employment over the remainder of this year," he said.
"Poor weather won't have helped builders over the past couple of months. Declines of this magnitude had already been foreshadowed by the slump in house sales reported since the Reserve Bank began the last leg of its tightening cycle in March 2007," Gibbs said.
UBS NZ senior economist Robin Clements said housing might prove to be a larger drag on economic growth than previously envisaged. "While this hardly seems to matter in the context of global developments, the risks are all in the same direction for growth, ie down," Clements said.
The Building Subcontractors Federation said the construction downturn was one of the main contributors to the recession. This would mean fewer construction projects undertaken at the high-value commercial end and the smaller domestic market.
It might also mean that work was priced on a more competitive basis with less margin and actually getting paid for work could become more difficult, the federation said.