NZ residential building consents down 1% in June - Westpac

Satish Ranchhod, Senior Economist at Westpac, notes that the New Zealand’s residential building consent issuance fell 1% in June, following a sharp 7% rise last month.

Key Quotes

“Over the past year, New Zealand consented around 30,400 new dwellings. We expect that consent issuance will continue to rise over the next few years. However, the pickup in consents and homebuilding may be gradual. Building costs and interest rates are rising, construction firms are already highlighting difficulties sourcing labour, and house price growth has slowed (particularly in Auckland). These factors don’t negate the need for more building. However, they may mean that the construction cycle is protracted. In fact, if we look back over the past six months, we see that consent issuance has been fairly flat.”

“In part, the levelling off in consent issuance reflects that home building in Canterbury is gradually winding back now that the peak in the residential rebuild is past. This may free up labour for activity in other regions.”

“In Auckland, where there is the largest need for new homes, we’re seeing only gradual increases. Just over 10,300 new dwellings consented in Auckland over the past year. While that does include a trend increase in multi-unit consents (such as apartment and townhouses), it is still below what is needed to keep up with population growth. With increasing reports of capacity constraints in the building industry, this signals that the supply shortfall in Auckland is likely to get worse before it gets better.”

“The value of non-residential consents issued rose 2% over the past year, with around $6.4b of work consented. Non-residential building activity has been trending up in recent years, and activity will be boosted further over the coming years as infrastructure spending increases.”