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Building consents stall in December amid falling home sales

Friday 29th January 2010

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The revival in residential construction stalled last month in what was a tough December for house vendors, though non-residential building perked up to end the year flat.  

There were 1,260 new dwelling consents, excluding apartments, issued in December, according to Statistics New Zealand, down from 1,458 a month earlier when new issuances rose a seasonally adjusted 2.8%. The value of residential building consents fell to $494 million in December from $537 million in November, though it rose 12% from the same month a year earlier.  

“Against the backdrop of weak existing home sales volumes, the data is not painting a picture of vibrant recovery in residential construction” said Bernard Doyle, strategist at Goldman Sachs JBWere. “A robust residential recovery underpins our GDP growth forecasts for 2010 - to the extent it doesn't emerge, it will feed back into monetary policy settings.” 

During the same month, house sales dropped to a “concerning” 4,957, according to Real Estate Institute data, and economists are wary that last year’s revival in the housing market, driven by returning expatriates and new migrants, hasn’t been as strong as previously suspected.

Any softening in the housing market will give central bank Governor Alan Bollard room to hold off from hiking the official cash rate as it eases potential inflationary pressures. Bollard kept the OCR at 2.5% yesterday, and economists are predicting he will wait until the middle of the year as he previously indicated.  

The value of new non-residential building consents rose 3.9% to $404 million last month from November, driven by $63 million worth of new hospital and nursing home projects. That’s on top of the $88 million worth of issuances for new health-related building in November.  

Factories and industrial buildings was the hardest sector hit last month, with issuances down $33 million, and it was the worst area for non-residential construction last year, with consents down $187 million from 2008.  

New issuances for apartments, which include units in retirement villages, rose to 93 from 42 in November. The series contributed 6.9% to the number of new dwellings in December, compared to the monthly average of 11%.

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