The amount of building work being undertaken in New Zealand hit a new record in the second quarter of this year, surpassing $7 billion in a single quarter for the first time.
Statistics NZ's latest quarterly survey of building work put in place shows $7.214 billion of new building work was commenced in the second quarter of the year, eclipsing the previous record of $6.74 billion set in the fourth quarter of last year.
The strong growth was mainly driven by residential construction, with $4.285 billion of new residential construction commenced in the June quarter. This was a new record for any quarter. There was a further $644 million of residential alteration work, which was the second highest level of alteration work commenced in any quarter.
That took the total value of new residential building work commenced in the second quarter to an all time high of $4.928 billion.
Non-residential building work was more patchy, with $2.286 billion of work started in the second quarter, still well below the record $2.43 billion set in the third quarter of 2019.
Obviously the strong growth in building activity evident in the second quarter will not continue in the third quarter because of the Level 4 lockdown put in place in mid-August that remains in place in Auckland.
However last year's figures show building activity recovered quickly after lockdown restrictions were eased.
Total building activity eased from $5.886 billion in the first quarter of last year to $4.82 billion in the lockdown-affected second quarter, but then bounced back strongly to $6.679 billion in the third quarter.
If that pattern holds true this year, building activity is likely to be well down in the third quarter but then lift strongly in the fourth quarter.
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10 Comments
Houses houses everywhere, not a one to buy
What is 7.2b?
How many litres of Fossil energy, how many trees cut down, hot much pollution, can the tract sprawl be serviced beyond Fossil energy?
But no: 7.2b. Magic.
And materials shortages?
https://i.stuff.co.nz/business/property/126289729/builders-face-shortag…
Yes, I was wondering about that! Daughter and SIL need a new retaining wall built but are going to have to wait months for the materials from overseas.
Also what about the infrastructure to support all this growth?
https://www.nzherald.co.nz/business/infrastructure-report-nz-playing-in…
Things will slow quite a bit by this time next year. The near impossibility of building to Homestart caps will slow FHB purchases of new builds, unless the govt increase the cap - which they might well do, another step to keep the ponzi going...
Although I don't expect big increases in the OCR, even 0.75 by this time next year would start to have an impact too.
Then also factor in low immigration etc.
Kainga ora will keep going gang busters but they are what only 10% of new builds?
Think immigration will stay low? Once we hit the stage of reopening, I think it'll go bangbusters (whatever the government says about controlling it). Labour shortage narrative provides ample excuse.
I think it will stay low for the coming year.
I am projecting forward one year.
Migration is likely to be much higher in two years.
But even then I think house building will be much lower.
Much of our immigrant population is low wage and cannot afford to buy. And with rising construction costs, yields for investors in new builds will be getting even worse, possibly dropping from circa 4% to circa 3%. How attractive is that, when capital gains on townhouses might be limited moving forward?
As I say above, if the government increases the Homestart cap (eg. From 700k to 750k in Auckland) then that would give the sector another shot in the arm.
But they are running out of ammo. A further extension to 800k would be ridiculous.
Official stats are one thing, real world stats another. Contacts in the development sector are telling me what was $3200 per square meter for terrace housing 2 years ago is now $3800.
Then add in soaring land costs, and as I have said close to impossible to get a 2 bed townhouse to market in Auckland for less than 750k. We would have been talking 600-650k less than two years ago.
Wages have hardly risen and mortgage rates are nudging up.
I expect new builds to be down at least 20% in a year.
How far are those $7.2b dollars going compared to say, ten years ago? Are they buying us the same number of houses?
10 years ago it would be equivalent to around 14 billion in lending as a guesstimate
It would be more useful to track the number of bedrooms and square meters being built rather than a somewhat arbitrary nominal dollar figure.
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