Building consents continue to drop on an annual basis, reflecting “tough times” ahead for the building sector and a tighter housing market for prospective buyers, a senior economist says.
New data from Stats NZ shows 39,900 new homes were consented in the year ended October 2023, down 21 per cent compared with the year ended October 2022.
The decline is widespread, with consents down in every region in New Zealand except Gisborne and Marlborough.
Large falls were recorded in Auckland (down 24 per cent over the past year), Waikato (24 per cent), Canterbury (down 17 per cent) and Wellington (down 16 per cent).
The Stats NZ figures show 3060 homes were consented in October this year, down 14 per cent on October 2022.
Senior Westpac economist Satish Ranchhod said large increases in interest rates and build costs, and lower home prices, have left prospective buyers feeling nervous about making purchases and developers reluctant to bring new projects to market.
“That widespread downturn in consents over the past year reinforces our expectations for a sharp fall in residential constructions in 2024. Those we’ve spoken to in the industry have highlighted a sharp drop in forward orders.”
Favourable building sector conditions saw consents peak in May 2022 at 51,015. But with interest rates shooting up over the past year, those conditions have turned and there will be “tough times ahead” for home-buyers and the building sector until rates have stabilised, Ranchhod said.
“Conditions in the housing sector are in for a shake up over the coming year. We’re now seeing the rate of construction cost increases slowing (though we haven’t seen any material drop in build costs).
“At the same time, population growth is surging, and we expect house price growth will take a step higher over 2024 supported by changes in government policy (such as fully reinstating interest deductibility for rental properties).
“Over time, those factors will help to support building activity. However, tight financial conditions still signal some tough times ahead for the building sector.”
Most of the multi-unit homes consented in the year to October 2023 were townhouses, flats or units (17,605 – although these were down 16 per cent compared to the same period in 2022). Consents were issued for 3229 apartments (down 25 per cent) and 2733 retirement village units (down 3.1 per cent).
Ranchhod said there were also fewer commercial projects coming to market, with the amount of non-residential floor space being consented falling by 13 per cent over the past year.
“Developers have highlighted higher financing costs and concerns about slowing economic growth as key factors that are putting the brakes on new projects.”
Julia Gabel is an Auckland-based reporter with a focus on data journalism. She joined the Herald in 2020.