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NZ home building consents tumble in May as economy shrinks

Monday 30th June 2008

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New Zealand home building consents tumbled in May from the same month last year, providing more signs of a slowdown in the housing market that is crimping sales and prices.

The number of consents for new dwellings, including apartments, fell 29% to 1,653 in May from the same month of 2007, Statistics New Zealand said. Seasonally adjusted data showed a 42% drop from April, when several apartment projects caused a jump of 83%.

High interest rates and surging costs for fuel and food have dented consumer spending and demand in the housing market. Figures last week showing the economy shrank in the first quarter, may herald the start of a recession, some economists say.

"Residential building activity will continue to be a drag on economic growth through this year," Robin Clements, senior economist at UBS New Zealand, said in a report today. The deteriorating growth outlook "brings into play" the possibility of a rate cut as soon as July 24 or a more aggressive, 50 basis point move in September, he said.

Shares of Fletcher Building, New Zealand's biggest construction firm, fell 0.9% to NZ$6.32 and earlier traded at NZ$6.28, the lowest in about three years.

Statistics New Zealand said the seasonally adjusted data showing the change from April 2008 should be treated with caution because of the size of the previous month's move.

The value of residential building consents fell by NZ$181 million to NZ$553 million in May from a year earlier, while non-residential consents dropped NZ$36 million to NZ$356 million.

Consents fell in 13 of New Zealand's 16 regions, with the largest declines in Auckland (down 157 to 322), Canterbury (down 148 to 269) and Waikato (down 118 to 243).

"Diminished credit availability from the finance company sector as they consolidate balance sheets, and the potential unloading of assets into a declining property market, will be significant headwinds to the economy," ANZ Bank economists said in their New Zealand Market Focus report today.

By Jonathan Underhill

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