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Building consents down in May, reversing April's jump as budget and rate hikes worry home buyers
Statistics NZ figures show house building stuttered in May on a seasonally adjusted basis as home buyers eyed up potential changes to property taxation rules and a likely rise in interest rates.
(Updated with comments from ASB economist Jane Turner on the outlook for housing being subdued as rates are hiked)
Statistics NZ said seasonally adjusted dwelling consents, excluding apartments, fell 9.5 percent in May from April, after rising 13.4 percent in April in from March.
"The trend has been increasing since March 2009, but remains at a low level," Statistics NZ said.
Including apartments, the seasonally adjusted number of new dwelling consents fell 9.6 percent, after rising 8.4 percent in April.
"The seasonally adjusted series reflects short-term behaviour and in recent months has been influenced by increased variability, which differs from the normal seasonal pattern," business statistics manager Louise Holmes-Oliver said.
ASB economist Jane Turner said a recovery in building demand last year was now losing momentum as rates were increased and tax changes made property less attractive. However, she still expected the Reserve Bank to push ahead with further rate hikes as the drivers for economic growth shifted to the export sector.
Demand for new housing has started to peter out in recent months, with the RBNZ set to steadily increase interest rates over the next year. In addition, recent tax changes have reduced the attractiveness of investment property at the margin.
Population growth will also provide less support to housing demand over the next year. The pace of permanent arrivals has slowed over the past year while permanent departures, particularly to Australia, have started to pick up.
The outlook for the construction industry remains subdued. Domestic-led drivers of economic growth are likely to be less of a force over the next year, with growth to be led by export-exposed industries. With the export-led recovery in mind, we continue to expect the RBNZ will increase the OCR by 25 basis points in July, and continue to gradually increase the OCR over the next year.
Here is our interactive chart below.