Building consents stuck near record lows in September

Residential building consents rose slightly in September because of a batch of new apartment consents, but activity remained near 25 year lows as the property market slumped and buyers stayed away. The data is expected to reinforce the Reserve Bank's view of a depressed housing market further weakening consumer spending and sucking inflationary pressures out of the economy. The bank is widely forecast to cut the Official Cash Rate by 50 basis points to 6% on December 4 before cutting it below 5% next year. Total consents rose to 1,635 in September from 1,328 in August, but was inflated by a surge in apartment consents totaling more than the last three months put together. The data appeared to show the surge was located in Wellington. However, total residential building consents for the year ended September 2008 were down 19% from the year ended September 2007, the fourth consecutive year on year decline since 2004. Statistics New Zealand said the trend for consents was at its lowest level since 1983. Of the 1,635 residential dwellings that were granted consent, 366 were apartment units, up from 124 in August. For the month of September 2008, apartment unit consents rose 346% from the same month last year. For the year ended September 2008, apartment unit consents fell 12.5% from the year ended September 2007. Excluding apartment units, there were 1,269 residential dwellings that received building consents in September, up from 1,204 in August. For the year ended September 2008, consents for dwellings, excluding apartments, fell 20% from the year ended September 2007. Consents during the month of September 2008 fell 33% from the figure in September 2007. Total residential building consents for the year ended September fell 19% from the year ended September 2007. This was the fourth consecutive year ended September that consents fell year on year. The high number of apartment units that received consent skewed the seasonally adjusted figures for residential building consents. Seasonally adjusted figures for all residential dwellings showed an 8.4% increase in building consents from August. Westpac had forecast a 2% decrease. Not including apartment units, the seasonally adjusted figures showed a 0.8% decline from August. BNZ Markets Head of Research Stephen Toplis said the figures reinforced his view that residential construction would fall 18% in calendar 2008 and would fall 13% in 2009. "In fact it could yet prove much worse than this," Toplis said. "New dwelling unit authorisations published today support this concern with the annual rolling number of permits dropping to a mere 21,000 on the way to levels last seen in the 1991 downturn. Annual authorisations peaked at over 33,000 in 2004," he said. "Further evidence of the demise of the housing market came with the release of today's household lending data. Lending growth in the month of September dropped to a paltry 0.2%. This makes the drop in lending in the 1998 and 1991 recessions look modest by comparison."