The residential construction industry looks set for a serious downturn with the number of new dwellings consented in February down 29% compared to February last year.
February was the fifth month in a row that the number of new homes consented has been below the same month of the previous year, bringing an end to a spectacular 11 year run of increasing residential construction.
On an annual basis, 48,257 new dwellings were consented in the 12 months to February this year, down 3.3% compared to the previous 12 months.
Although the decline was small, it was the first time that the number of new homes consented has declined on an annual basis (February year) since 2012.
However over the same period, the number of new homes consented annually has increased by 342%, spawning a building boom that has propelled the construction industry into one of the mainstays of the economy.
A slowdown in residential construction activity later this year and into next year as existing projects are completed, now seems all but inevitable.
The estimated economic impact of a slowdown in residential construction can be seen in the building cost estimates of the new dwellings consented, which was $1.313 billion in February this year, down by $332 million (-20.2%) compared to February last year.
The decline in February consents compared to a year ago was across the main housing types of standalone houses -33.2%, apartments -19.3% and townhouses/home units -36.9%, with retirement village units the only sector to show ongoing growth, with consents up 78.9% in February compared to a year earlier, although on an annual basis retirement village units were only up 10.9%.
A slowdown in non-residential construction is also on the cards, with the total floor area of non-residential buildings consented down 9.0% in the 12 months to February compared to the previous 12 months.
The total value of all building work consented (residential and non-residential) was $2.444 billion in February, down 7.2% compared to February last year.
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52 Comments
Pretty much as I called it more than 1.5 years ago, although a little bit later to truly slump than I expected (I thought the consenting slump would be underway by spring last year)
Some very hard times on the way, not just for builders but the many professions, trades and suppliers that rely on residential construction.
And of course that means less spending in the wider economy by those people.
Depends how much further it drops. At the peak they were probably 29% over capacity so might not be much unemployment yet.
Do you work in an area connected to housing construction? I do, and I am hearing of quite a few redundancies in consultancies. Not to major levels, but it’s brewing.
If it's consultants did we really lose anything?
I looked at a project last week, foundation stages of a much larger regional project. The ratio of middle layer consultants to people actually doing work was 2:1. Multiple different entities, all clipping the ticket and not really providing much. They all wanted my name and credentials to enter into their individual minutes, proof they were involved in something that happened that day.
Maybe if things go tits up they could go pick up a hammer or screwdriver.
I assume he is talking about engineering consultants. I’d be interested to see how far the project gets without them.
Architects, engineers, surveyors, planners, landscape architects
You forgot fire engineers, traffic engineers, lighting engineers, and other designers plus the Homestar consultants that have to come out and see the insulation that the council and photo evidence has already confirmed.
Homestar is voluntary, developer’s choice / prerogative
Tend to agree with your comment. Instead of we'll do your house in a year to 15 months, its probably now down to 9-12 months now. Later in the year it could very well be down to 6 to 9 months. If there is no shortfall in labour and only some in materials then there no reason why a modest house, <200m2 should not be designed, consented and built in 5-6months.
There's also a vast amount of work to do in all construction arenas along the east coast. Current demand far outstrips supply just to fix and replace what was previously there, without even factoring in what would normally be available as new, reno or maintenance.
Not to worry House, I contacted Megan Woods last year to advise the govt to set up a fund to buy out developers at cost of land & materials to keep builders in employment but punish developers then use those buildings for state housing. The concern being that builders flee overseas when the work dries up and don't come back when we need them to be here building.
The response was that we will just import builders to replace the ones we lose.
Lol, I approached her with a similar idea. And others.
I won’t bother. She ALWAYS knows best.
Will be interesting to see how consenting for retirement villages tracks now, given recent commentary about the levels of debt for a few of the main players.
There's a boatload of totally new ones breaking ground at the moment, probably 2-3 years of work there.
And existing ones expanding, not sure how they register in consents figures.
I have noticed a greater level of proactivity from head contractors and people at the design and engineering levels. Presumably a mixture of more available time and a hunger to offer better service than "it'll happen when it's done".
Edit - you are talking about retirement villages.
To be fair most of the commentators here have been on yet another planet for decades now, always predicting the end of the world and then revising it to next year when they are wrong.
So true, I have been reading interest.co.nz articles and comments since 2013 when I first left University. The articles are great but the comments on the whole lean overly pessimistic. If the economy and housing market are growing well then they are about to fall off a cliff, if they are in decline well then the world will be over by the end of the year.
Well said! It's quite sad how many people revel in predicting armageddon.
I'm a bit 50/50.
There's elements of what we're doing and how we're living that look to do us more harm than good. Many of the hot button topics are really just pointers to a substantive change required.
On the flipside, decent change is unlikely without everything breaking. This could be decades in the making so in the meantime try and make the most of it.
The current entitlement attitudes are far removed from those mid last century. Its been a trend developing, but not a good one. I say, no recession will turn gang members into law abiding, but I would love to hear any counter argument
Past politicians such as JFK inspired people to think about others. To a degree JA did the same with her Be Kind and Lets Do This. Trouble is, under the mask she wasn't kind. We saw that when the mask would slip and there's many examples we could talk about.
There's such a large convergence of issues.
Largest is probably how individual and segregated everyone is now. In turn, they require more services to fill the void that strong community bonds would normally fulfil. Then because there's so many vested interests, government is ultimately inneffective, because you're having to take too many considerations into account and there's not the ability to pay for so many things.
Our leaders and government are just representatives of us. Only us can fix us.
Oh, all those DGMs like me who said house prices would drop at least 20%. DGMs! Always pessimistic and never right….
I never worked out why saying house prices will crash to affordable levels is a DGM statement.
Surely a house price crash will in the medium to long term bring far more happiness to more people than it brings sadness to a few
In my world the DGMs are the people wanting house prices to stay level or rise and thus they must want productive businesses to stay on the back burner and young professionals to leave and less skilled immigration etc etc.. thus forever they want nz in a downward tradjectory as a nice place to live for the masses... thus dgms.
Everyone knows market crashes happen. Predicting it every year and being right once a decade doesn’t mean you are smarter than anyone else.
No idea if this is what you have done but been seeing the same predictions for the last 5 years at least.
I bought my house in 2019. I also predicted on this website that the market would crash between 2022-2025.
If I thought every year that the market was about to crash then I obviously wouldn’t have bought in 2019. I thought the market would have a handful of good years after 2019 before things went bad, and I was right.
Some people around here like to say I was just guessing, good on them.
No offence but I doubt anyone around here cares what an individual article commenters predictions were.
That was about the time he's ready for trading up and thinks he can influence the market. He does get at least 13 votes on a good day
That’s a strange comment given you directly asked me a question about my predictions.
Hey bro, what's your favourite colour?
Uhhh, blue.
Nobody cares man.
Nobody here predicts the end of the world
Just like nobody predicts fortune for all, forever.
People just use different data sets to get a feel for what might happen into the future... Some pick it right some don't
I've picked the last 3 but prior to that got the previous 40 years worth wrong.( mainly because I was young and dumb and Because i didn't care)
It's all good
Yeah I agree there are still projects that have been agreed and have to be completed although I have heard the next year or so and then nothing. Time will tell but it’s going to flow through to trades at some point, it’s hitting the pre work stuff like architects now. Edit: building in general
Yes exactly the pre-build stuff is starting to get hit a bit - architects, design engineers, planners and urban designers. These jobs always get hit first, before builders, tradies etc
It has already hit the trades and suppliers. A lot closing up.
Surely not? It’s all good in Jimbo’s fantasy world!!!
Examples?
It started slowing down in March 2022 for “pre-build” work. And to think 38% of NZers still think voting for Labour is a good idea!
Some of the big listed companies have said they are slowing down developments and/or changing focus. Reduce the size of the pipeline to release cash tied up in development, pay down debts, and presumably capitalize on the increased unit prices a few years down the line as supply fails to keep up.
I am invested in OCA - I believe that if they can sell down the recent, nearly complete, large developments they can pay down the vast majority of their debt if they wish. They are also lucky to have secured a large chunk of bonds at 3.3% for 7 years back in 2021.
On the other hand, RYM seem to have been caught completely off guard by recent events and shareholders have suffered accordingly.
Nothing new here ....boom and bust. Make sure you capitalize on the downside because it wont last.
IF ONLY WE HAD BEEN ABLE TO SEE THIS COMING
Lol
I have looked at stats.govt.nz and I can see Tasman consents year to February went up to 644 to year ending Feb. That is 11 dwellings per 1000 population again the third highest in the country. Auckland and Canterbury not that far ahead. Despite that there are stories going around about some spec builders not selling much for a while. I wonder how long it will take the new Nelson Mayor to get that city to catch up with Tasman. A lot of Tasman growth is coming from the lack of supply of land and restrictive planning rules in Nelson.
Fantastic
Look forward to the greed coming out of the Market.
You mean by declining supply and the current rental owners selling or moving to social housing, and the remaining owners putting rents down to make a loss out of kindness?
I live in OTP( One Tree Point). There are hundreds of sections ( the Landing, the Moorings ,Marsden cove,..) developed that can't be sold. And hundreds developed that are on hold to try and reduce the supply ( low/ no current demand)
Before nov21 they would sell out in days and all be built on . Now the new stages have stopped and the earlier spec houses aren't selling and the prices are falling through the floor. Dec 22 8 listings today 95.
There are another 569 sections to be developed that are stopped and one larger development that is now for sale.
then in Ruakaka and Waipu there are 5 more developments ( full of new sections). some sold some not but no building going on
There are no buyers because they are now overpriced and sellers are to over capitalized to drop prices to meet the few buyers.
but the worst thing is ... These development s are staged and as such the dirt, vibration and noise of the sites ( The Landing for eg)plus the house building is from 6an to dusk 6 days a week (and likely to go in for another ten + years at the current rate ) means people don't want to live here. Many are 2 years in and selling up
And on top of that, the builders plumbers etc used to number in thier hundreds. Now there are next to none ...
It's looking rather glum
Don’t worry, JimboJones says everything is all Ok
Yeah 👍 in the rich white enclaves of Wanaka and Queenstown!
Look on trade me... There is a huge amount of new builds and sections that are not selling ... Right at a time of high supply and low demand!
The government are churning out, 2 years too late, new builds that are compounding the over supply issue right at the start of a recession...
this won't be a fast deep crash. It will be a slow deep long lasting crash.
Jimbo might have to dial back those words
He will come back with his usual weasel words - ‘I didn’t say it *wouldn’t crash*’
IT GUY is that you again. Transparent
"There are hundreds of sections ( the Landing, the Moorings ,Marsden cove,..) developed that can't be sold."
price is too high
How is the golf at OTP?
In the name of trying to achieve the unsustainable goal of "affordable and sustainable house prices now and for the long term" the current government are strangling the supply of dwellings.
Build costs up, Interest cost up, Finance availability strangled by over legislation, Property prices down
= Looming housing shortage (in about 2 years time)
Whilst there is a good level of new builds still under construction the lack of viability to develop new builds from scratch today and the dire state of finance availability for developers to buy sites to develop today guarantees there will be another housing shortage in about 2 years time.
If Labour lose the election this year you can bet your bottom dollar they will be campaigning just before the 2026 election on the same cries they made in 2017 of National causing a housing shortage.
In the name of 'stability' this government (and their not so subtle intrusions on RBNZ policy to achieve "sustainable" house prices which this government and the Finance Minister pretend they have nothing to do with) have created the most volatile property market in recorded history.
Driving around Auckland, I'd say there's a risk of a very serious downturn in the property market. Thousands of new houses and apartments under construction, property companies starting to go bust and heaps of new factories and offices being built, as the economy tanks and interest rates rise.
One of my neighbours took leave from the police last year to sell property, now he's back in the police.
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