The recovery in residential building demand faltered in September, with dwelling consent issuance falling 17% and reversing the previous month’s surge.
In September 2011, the number of new dwellings authorised is down compared with the same month last year. Consents were issued for:
1,246 new dwellings, including apartments, down 1.3%
1,124 new dwellings, excluding apartments, down 6.5%
122 new apartments, up 103%.
In seasonally adjusted terms, the numbers of new dwellings authorised, both including and excluding apartments, showed large decreases in September 2011 following large increases in July and August.
Fewer new dwellings in 10 of 16 regions
The largest regional decreases in dwelling numbers were in Wellington, down 42 units to 65, in Hawke's Bay, down 40 units to 24, and inSouthland, down 17 units to 18.
The region with the largest increase in dwelling numbers was the Bay of Plenty, up 93 units to 181. This rise was driven by consents for three new apartment complexes, consisting of 107 units, in Tauranga. These apartments include 79 assisted-living units in a new retirement village. Although the number of new dwelling units is high in the Bay of Plenty, the value of these new dwellings has not increased by a similar amount. This is because the consent for only the first stage of this retirement village has been received, which only accounts for a small amount of the total value of the entire complex.
The decline follows two months of strong growth, which had been encouraging to see, said ASB economist Jane Turner.
The extent of the decline in September was disappointing. The decline was broad based, with falls recorded in our seasonally-adjusted estimate of Canterbury dwelling consents, and throughout the rest of the country.
Nonetheless, the underlying trend for residential building remains a positive one, with ex-apartment consent issuance up 10% over the quarter, which points to small recovery in residential construction towards the end of 2011.
There has been a small improvement in underlying demand for construction, reflected in the increased demand for housing over the past 6 months – particularly in Auckland. It remains too early to see any meaningful start to earthquake reconstruction in residential areas.
There remains a considerable amount of uncertainty around the timing of this, but the current consensus is for rebuilding to start to gather steam around the middle of 2012.
Non-Residential ConsentsNon-residential consent issuance in September continues to suggest an encouraging outlook for near-term private non-residential investment. In particular, consent issuance for offices and storage buildings continue to improve. This indicates businesses are feeling confident enough about demand over the coming year to plan for an expansion of operations. Today’s result is in line with the latest business confidence survey results. While there has been some easing in commercial construction intentions, the measure suggests a continued recovery in non-residential investment over the coming year – albeit at a very gradual pace.
Nonetheless, there remain areas of weakness. Statistics NZ notes half of the earthquake-related non-residential consent issuance in September was due to repairs to The Palms shopping centre.
Despite this, consent issuance for retail outlets such as shops and restaurants fell over February. This suggests the outlook for the retail sector remains subdued. The majority of earthquake-related consents in September were for non-residential buildings, which totalled $26 million. The remaining $3 million was for residential building consents.
The extent of decline in building consents in September was disappointing. Nonetheless, looking through the volatility, the underlying trend for building demand remains a positive one. This data does not contain any fresh implications for the RBNZ. The most crucial aspect of the construction outlook is the timing and extent of earthquake reconstruction activity and the RBNZ is not expecting this to pick up in any meaningful extent until mid-2012.
Earthquake-related consents total NZ$29 million in September
In Canterbury, building consents identified as being earthquake-related totalled $29 million in September 2011, compared with $20 million in August and $32 million in July. In September, non-residential building consents totalled $26 million. Over half of this value is attributable to repairs to The Palms shopping centre. The remaining $3 million was for residential building consents, including four new dwellings, said Statistics NZ.
Since 4 September 2010, about 580 earthquake-related consents have been identified, totalling $157 million. This includes 194 new dwellings, of which 145 were relocatable units.
(Updated with detail in headline)