Building consents fall in March

Photo / Paul Estcourt

New Zealand residential building consents fell for the third month in four in March, underlining the tepid pace of recovery in a housing market that is facing tighter tax rules and less activity from developers.

Consents fell 0.4 per cent in March, seasonally adjusted, after advancing 5.8% in the previous month, according to Statistics New Zealand.

The number of apartments authorised rose to 75 last month from just 13 in February, which was the lowest since 1995. The monthly apartment figures are typically lumpy.

The building data comes a day after Reserve Bank Governor Alan Bollard noted that households "remain cautious, with the housing market and household credit growth subdued."

While the economy is recovering broadly as the central bank expected, Bollard signaled he won't rush to aggressively raise interest rates, saying a move will be made "over coming months" and the track of tightening will be more modest than in previous years.

"The level of issuance remains extremely low by historical standards," said Philip Borkin, economist at Goldman Sachs JBWere. "We continue to believe the pace of recovery will be more subdued relative to history. Today's data reinforces that a June hike, where the market is sitting, is far from a done deal."

Finance Minister Bill English's Budget next month will include tweaks to the tax treatment of investment property, which could end depreciation on property and ring-fence tax losses on LAQCs.
Developers have seen sources of funding dry up as finance companies faltered and banks tightened credit rules.

The value of residential building consents was $5.4 billion in the 12 months ended March 31, the lowest for a March year since 2002, the government statistician said.

Excluding apartments, new dwellings authorised fell 8.3% in March, after rising 9.8% in the previous month.

The value of non-residential building approvals rose 3.9 percent to NZ$345 million.

ASB economist Chris Tennent-Brown said despite the March result following a big lift in February, "a large decline is disappointing given we have been expecting the trend in consent issuance to continue recovering".

"Positive migration flows, and the spring pick-up in the housing market failed to spark a significant pick-up in building consent issuance. Instead, the slowdown observed in the property market over recent months may be holding back building intentions."

"Uncertainty over the taxation of property should be clarified in the May budget. But right now it is contributing to a soft 2010 housing market, and in turn, weak building intentions."

Tennant-Brown said the bank expected overall building activity would pick up over 2010, "having been in retreat for much of the preceding 2 years as housing construction shrank".

"We expect housing construction will recover to a degree over 2010 and provide a boost to GDP growth. However, the modest level of consent issuance had raised a question mark over the strength of the recovery."


WITH NZ HERALD