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Caution as building consents show some hope

Tuesday 11th January 2011

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Latest building consent data suggests some signs of improvement, but economists are holding back their enthusiasm.

Statistics New Zealand (SNZ) today said the value of non-residential building consents in November reached the highest level since May 2009, at $479 million.

Residential figures showed 1470 new dwelling units were authorised in the month, of which 226 were new apartment units including 154 assisted living apartments associated with retirement villages.

The total of new units was 2% down on a year earlier, while the apartment excluded number for new dwellings at 1244 was down 15%. When seasonally adjusted the total was up 8.8%, while with apartments excluded the number was down 2.6%.

The value of all residential building consents, including alterations and additions, was $514 million which was 4.4% lower than November 2009 but still the third highest figure for the past two years.

The value of consents for all buildings in November was $993 million, up 7.2% from a year earlier, and the highest amount since September 2008, SNZ said.

For education buildings, the value of consents was up $72 million from November 2009 to $119 million, while for factories and industrial buildings it was up $60 million to $102 million.

BNZ head of research Stephen Toplis said the consent data was distorted by three significant one-offs, including the large number of apartments.

Even with the apartments included, the annual drop in residential floorspace authorised was 10.9%.

An improvement in migration inflows and low mortgage rates were providing support to the residential construction sector.

"But with turnover in the existing stock so low, an apparent excess of inventory and prices in decline, we believe there is further downside yet," Toplis said.

The rise in non-residential consents was due to large consents for a factory and education building. If those were removed there was a double digit annual decline.

Goldman Sachs economist Philip Borkin said the lumpy nature and non-residential issuance made it difficult to draw any concrete conclusions from today's numbers.

"Excluding these factors, construction activity continues to look soft, before Canterbury reconstruction activity should support activity into 2011."



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