Big decline in the number of building consents being issued suggests trouble ahead for the building industry

Property / news

Big drop in building consent numbers suggests the construction industry is headed for a sharp downturn

4th May 23, 12:01pm by Greg Ninness

The pending slowdown in residential construction appears to be gathering pace, with a big drop in the number of new homes being consented.

The latest figures from Statistics NZ show that 3970 new dwellings were consented in March, down 25.1% compared to March last year.

March was the fifth consecutive month that the number of new dwellings consented has been less than it was in the same month a year earlier.

In the 12 months to March this year, 46,924 new dwellings were consented, down 7.9% compared to the previous 12 months.

The biggest decline on an annual basis has been in stand alone houses, with 19,668 consented in the year to March 2023, down 22.6% compared to the previous 12 months.

The number of apartments consented in the year to March was down 2% compared to a year earlier, while retirement village units were up 14.2% and townhouses and home units were up 7.5% (see the second chart below for the monthly trends by dwelling type).

However, high inflation in the building industry meant the total value of building work consented for new dwellings in the year to March was barely changed, at $19.65 billion, down just 0.3% compared to the previous 12 months.

The slowdown in residential construction is also evident in most regions.

The only regions where the number of new dwellings consented in the year to March was higher than it was in the previous 12 months, were Tasman +18.8%, Marlborough +35.2% and West Coast +6.5%.

In the main population centres, annual new dwelling consents in Auckland were -5.4%, Waikato -13.9%, Bay of Plenty -24.3%, Wellington -6.0%, Canterbury --4.5% and Otago -12.8%.

The biggest annual decline of -29.7% was in Taranaki (see the first chart below for the full regional monthly trends).

The decline in building activity also appears to be affecting commercial and other non-residential construction.

The non-residential construction industry, which includes a wide variety of buildings from factories, shops and offices to schools and hospitals, also appears to be slowing,

The total floor area of non-residential buildings consented in March was down 24.7% compared to March last year and in the year to March was down 12.4% compared to the previous 12 months.

The persistent and increasing reduction in dwellings being consented means companies operating in the residential construction and supplies market will be starting to notice the downturn in work as existing projects come to completion.

It appears that the the construction boom that has been a mainstay of the economy over the last few years is now coming to an end.

The comment stream on this story is now closed.

Building consents - residential

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Source: Statistics NZ

Building consents - type

Select chart tabs

Source: Statistics NZ

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58 Comments

by Von Metternich | 4th May 23, 12:05pm 1683158754

My little brother got sacked a week ago, half way through his apprenticeship (as an HVAC Tech) because the pipeline of work had completely dried up. His comment to me was "All the houses made after ~2018 are dogsh*t, don't touch any of them. Unskilled crews, houses built entirely by apprentices on razor thin budgets with the cheapest materials."

Take from it what you will.

by tomjones_04 | 4th May 23, 12:32pm 1683160365

Can't be as bad as the crap that was churned out during the leaky home period... or can it? If I were renting a new build with a 2 year old... I'd say goodbye to my bond. They feel like they were ordered off Ali express.

by Sam B | 4th May 23, 1:14pm 1683162853

I think they'll be better than the leaky buildings of the 90s, at least in terms of weathertightness. They'll probably reveal themselves to be crappy in some other, completely different ways that the Building Code hasn't predicted though. The legislation is always backwards-looking.

I think it's very obvious just looking at most new townhouses that they've been built as cheaply as possible. Aesthetically garbage too, but a lot of people seem to like the endless 'black-white' mixed-cladding split-level headache that has gobbled up Auckland's suburbs. In ten years they'll shudder; in 50, it'll be a 'period style'...

by Von Metternich | 4th May 23, 1:28pm 1683163728

Those townhouses crammed together will be slums in 20-30 years. They are god damn ugly, poorly made and built with the cheapest material. Half of them are covered in vinyl which will fall off.

Contrast that with the Houses build circa 2004-2006. The McMansion style was ugly but the houses were well built, especially the brick ones in response to the scare of the Leaky Homes scandal.

by rastus1 | 4th May 23, 1:43pm 1683164609

The destruction of the suburbs is well under way in the Tron. Back sections filling with cheap porta loo style shacks, good homes pulled down to cater for battery housing.

Meanwhile in the wealthy county side suburbs it's fine to have a several acres complete with empty castle,unused tennis courts, pools and tractor mower to keep that pesky grass under control.

What s##t show of a plan.

by Shaft | 4th May 23, 3:50pm 1683172229

Yip imagine the HSE scaffolding costs to repaint the every 10 years...rediculous design with huge future maintenace costs.

This is funky looks over function

by Shaft | 4th May 23, 2:48pm 1683168529

Having been in the building industry for over 40 years i can say without hesitation the new builds are all over the show!

It depends on design, materials spec'd v Materials supplied, budget, cladding choice, builders ethic and morals v profit/ quality, build area and council compliance team.

Roofing material and alloy joinery are good quality. As are the plumbers and sparkies

Claddings like James Hardies Linea are another pending nightmare. As are some brick supplies and imported flat shèet cladding

The worst are ...

-Timber supplies quality, especially exterior grade above H1.5... even clears are warping and twisting and now Laminated is the new " clears" 🙄

- colour steel cladding , gutter and Fascia/ barges will not last the 50 year requirerment if it is still there?

-Concrete slab layers

-Roofers flashing and finishing detail.

Bulk home suppliers like Signature and Generation etc quality ( one biilder runñing up to 25 sites but letting the min wage " dispensable" apprentices do the work

Plasterers and painters are still cowboys saved by flat low sheen finishes

by ChrisOfNoFame | 4th May 23, 2:56pm 1683169011

the new builds are all over the show!

Agreed.

If you've skin in the build you need to be on-site two or three days each week and/or have an extremely good builder and/or architect who knows all their subbies extremely well. Actually, when I think about that statement - it's true all the time.

by James Thrace | 4th May 23, 3:51pm 1683172299

Claddings like James Hardies Linea are another pending nightmare. As are some brick supplies and imported flat shèet cladding

What's wrong with Linea Board? If it's installed properly by a qualified cladder who has worked with it regularly, there's not much of an issue.

Have recently done a like for like replacement under Schedule 1 of the Building Act, to avoid dealing with the council, of linea board to replace 35 year old cement fibre board that was direct fixed (poorly) and was signed off by the council (hence avoiding dealing with incompetent council staff).

by Shaft | 4th May 23, 5:47pm 1683179263

The joint in boards being free spanning and subject to movement requires constant attention with temp fluctuations abd building moverment.

Same with Concealed Stainless fixings popping fillèr out then allowing water ingress into board thus softening board ad alowing board to be compromised and detached.

Ive seen the start of soft mushy areas board on walls and poped fixing holes quite a lot. Especially on houses with med to dark colours or in subdivisions with continueing surrounding earth works and vibrating roller compaction machines.

No water ingress beyound the wrap yet..? Until it is breached by wear or nail hole penetration.

by HouseMouse | 4th May 23, 5:51pm 1683179462

Out of interest, what issues do you see with concrete slabs?

by Retail shop | 4th May 23, 8:16pm 1683188184

No access to internal drainage and plumbing. Slabs have been around for decades now though.

by msp | 4th May 23, 8:34pm 1683189241

ironic though, the state houses my dad built in the 40's and 50's are still holding their own70+ years later, wooden w'boards, conc tile steep roof...with some injected insulation and retrofit joinery they'll go another 70. I blame BRANZ and the building act

by Independent_Observer | 4th May 23, 1:38pm 1683164286

Any word if staff that lost jobs found more work?

Or are they going to have to re-trade or head abroad?

I’ve always wondered when we got to this point whether we’d have a mass exodus of tradies from the country - similar to Ireland following their housing slump

by Shaft | 4th May 23, 3:12pm 1683169967

Many northland tradies just follow the work.

Remember one qualified builder runs many sites utilising a few apprentices.

A new build does not require much qualifiied builder input

1 a slab Layer

2 frames and trusses up by builder

3 a roofer and a garage door company

4, brickie, plumber and sparky

5. Longrun gutter and fascia installer

6 plasterer painter

7 Kitchen and bathroom installers

8 Carpet and lino installers

9 builder fits windows doors and doess joinery trim, may instaĺl baths, showers abd deck and fences.

A BUILDER IS JUST A COG IN THE WORKS.

by Slapheid | 6th May 23, 11:45am 1683330323

You are on fire today Shaft 💪.

Thankyou for the quality insights!

by Neil21 | 4th May 23, 3:21pm 1683170493

The new house building (LWTF - 3604) has ground to a halt.

New homes can't be built for the anything like the cost of existing houses after the 20% fall.

New houses are simply not affordable, but we need more homes because of immigration.

It is a mystery as to how this problem will be solved with existing tool the govt has.

Cutting GST off sales of new homes may help.

Likewise limiting consenting / development council costs.

by ChrisOfNoFame | 4th May 23, 3:46pm 1683171986

Houses, as opposed to town houses, apartments, etc, are simply more expensive and less profitable than townhouses.

Single houses on a single site are more expensive because they require more land and are usually a bit bigger although often not by much - And the buyer pool is much reduced as soon as you get to $1.5m plus.

Multiple townhouses on a single site by comparison require less land, have significant economies of scale and can be priced to a larger buyer pool.

Welcome to the future.

by msp | 4th May 23, 8:38pm 1683189508

sure double glazing and cavities and all the rest are great, but Id rather see people living in Beazley homes than in cars...a German friend recently went back to Germany because they said NZ was way too regulated...thats saying something...

by pigeonbox | 4th May 23, 9:42pm 1683193355

You mean your friend is a builder? Or he felt we're over regulated in general?

by Northlander09 | 4th May 23, 2:32pm 1683167553

Wow its almost like there has been some sort of delay between interest rates increasing and construction activity on the ground. It is almost like it matches up with the completion of projects that were sold before interest rates went up! Who would have thought?!

I'll tell you who didn't seem to get this - Adrian Orr

by Rob Reid | 4th May 23, 12:25pm 1683159954

This is a total shock. Housemouse claims to have his ear to the ground in construction and has given us no warning of this crunch whatsoever. Shame.

by HouseMouse | 4th May 23, 12:29pm 1683160142

Haha

I take that as a complement (via sarcasm)

by Independent_Observer | 4th May 23, 1:33pm 1683164029

Waiting for certain commentators to jump in and tell you how your comments are always so wrong and lack ‘credibility’.

by HouseMouse | 4th May 23, 1:59pm 1683165581

My calls have been far from flawless, but on a number I have been pretty much on the money.

Yet apparently everything I say is garbage, and I am the Tony A of interest

by msp | 4th May 23, 8:39pm 1683189598

you mean compliment HM..

by The Black Swan | 4th May 23, 12:30pm 1683160222

On 15 June 2023, Stats NZ will announce that NZ is in a technical recession. Signals of an incoming depression are getting louder...

by OldSkoolEconomics | 4th May 23, 12:50pm 1683161403

A technical recession with persistent local inflation.

Means the OCR will be going up when we need it down.

This is going to be a great year to be in the business of liquidation, bankruptcy and receivership.

by IT GUY | 4th May 23, 2:17pm 1683166658

Follow www.number8.bid  smaller player but business is picking up. Manheim on trademe is going nuts.

by Zwifter | 4th May 23, 2:22pm 1683166935

A number of prolific commentators on here predicted that it would all hit the fan this year, you were warned way back when interest rates were still low and advised to fix long. You didn't have to be a genius to see this coming, the RBNZ totally screwed the pooch with their covid response to a problem before it was a problem, thereby turning into the mother of all problems less than 3 years later.

by ChrisOfNoFame | 4th May 23, 2:32pm 1683167570

Time for our lazy ass government (of any colour) to pull finger and realise they have far more levers to pull than the RBNZ. To say these people are economically incompetent would be justified except they do absolutely nothing!

by kiwichas | 4th May 23, 12:54pm 1683161680

It will hit the fan when the developers find they can't sell the stuff they have built for what it cost.

Development will slow a lot till these (often shonky)buildsare sold.

by OldSkoolEconomics | 4th May 23, 1:38pm 1683164283

They will know that already... we were looking to move sideways and went to see a few 'do ups' where the flippers had renovated half the house and put it back on the market..... trying to get out quickly

by rastus1 | 4th May 23, 1:45pm 1683164751

Quite a few houses pulled down in our area and the sections have sat...all of a sudden the new builds are going up at break neck. Racing like heck to get to market me thinks.

by Hamish | 4th May 23, 1:49pm 1683164951

Any stories of the sunset clause being used in reverse?

Buyers helping inspectors to find any fault in a rushed build which will delay sign off and trigger a get out? (If they had any hope of getting their money back)

by IT GUY | 4th May 23, 2:18pm 1683166729

No but plenty cannot complete due to bank pulling funding.

by ex socialist | 4th May 23, 1:25pm 1683163521

Actually the declines are very small compared to the change in the market - 5% decline in Auckland is still 20% above the rate they were building in Auckland in 2018.

And the lesson is that houses keep getting built even when prices fall. Because what is your alternative - to sell the section at a price that would allow the home to be built? And even if you are selling at a discounted price it is probably a price above what it was when you bought the land 3 years ago - before resource and building consents.

If you compare building consents to houses completed over the last five years you will find that there is about 30,000 building consents which were issued which have yet to be signed off. So there is a truck more homes ready to be supplied.

I suspect that there is a heap of couples in Auckland who bought off the plans 12 months ago, who are currently renting waiting for their house to be complete. And (assuming that at current interest rates they can still get finance) they will be settling and moving into their new homes - so there is every possibility that the there is going to be 10-20,000 rental homes coming on the market.

by OldSkoolEconomics | 4th May 23, 1:40pm 1683164446

Most of those couples will be looking to get out of the contract if they can.

if i signed up to buy a house for $1m with a $100k deposit and it was only worth $700k now with a much bigger mortgage. i wouldnt be rushing to settle.

presumably there will be a lot of legal wrangles

by BirdieNZ | 4th May 23, 4:03pm 1683173031

The houses will still end up on the market and housing people one way or another, though.

by Chris-M | 4th May 23, 1:41pm 1683164515

So we have an existing enormous shortage and unaffordability of houses, immigration is exploding, new house construction is crashing and we are heading into a recession. What sublimely competent and wise governance?

Maybe the government could do something to address this deadly concurrence?

- Cut immigration?

- Address the shortage of building land?

- Deal with the building material monopoly type situations?

- Do a lot more to help people build houses for themselves?

- Break up the strangle hold that house building companies have over the supply of land and thereby house construction?

- Build the thousands of new homes that they promised?

Na!! never going to happen! Waste of time even thinking about it.

It will be far worse when National take power. No hope left in NZ.

by ex socialist | 4th May 23, 2:18pm 1683166717

Well sort of - it is that construction isn't crashing - Auckland building consents down 5% and well over what they were 5 years ago.

And new rules ensure lots more houses can be built on the same land. plus heaps of funding into infrastructure - and more apprenticeships so the pool of builders is significantly increased.

But I would agree that Nats are likely to allow massive immigration to protect Auckland house owners and employers who don't want to pay a viable wage. And Labour invented a whole pile of complexities to requirements of building which has massively worked toward creating monopolies for building supply firms.

by IT GUY | 4th May 23, 2:20pm 1683166807

Labour is already allowing massive immigration

by JustAnOpinion | 4th May 23, 4:31pm 1683174692

National: "hold my beer"

by ChrisOfNoFame | 4th May 23, 2:52pm 1683168734

- Address the shortage of building land?

Try and keep up. lol. There's now heaps of land thanks to the MDRS and the NPS-UD. You just need to knock down the existing heap. And what's even better is that it's actually in places where people want to live rather than miles away in a semi-rural no man's land. Case in point, a 1015 sqm section with a single very low spec house sold in northwest Akl today for $1.5m. The bidders at the auction? All were builders, and canny ones at that.

by Chris-M | 4th May 23, 4:30pm 1683174637

If there are houses on that land, it is not available, except at ridiculously high prices. (do we really want to saddle new home buyers with this extra cost?) What are you suggesting? Evict the owners and demolish their houses for the benefit of developers? Now where else in the world does that happen? How about rating undeveloped land within the city boundary at developed rates; allowing a grace period of say 5 years following incorporation into the city to develop and sell the land?

by JustAnOpinion | 4th May 23, 5:03pm 1683176589

Having lived for 3 years in an small townhouse with two kids, this might be an economic good news story but will be a social stressor. Schools are not being built to allow for 20k immigrants and their kids/soon to be kids.

by ChrisOfNoFame | 5th May 23, 11:43am 1683243799

Different issue. That's an infrastructure issue, not a housing one.

That issue would exist even in a brand new subdivision and would actually be worse because it wouldn't be an 'upgrade' - every would have to be built from scratch with the poor rate payers having to foot much of the bill. (As an aside, what makes you think they'll all be immigrants? Most will be kiwis.)

by huttman | 4th May 23, 2:25pm 1683167126

a lot of projects, building or renovating will be delayed or canceled. and we will once again be behind our building needs.

by Wrong John | 4th May 23, 2:41pm 1683168087

Don't worry about what the Nats will do, they're not the govt yet. Labour has opened the floodgates & we have to get through the winter of 23 first. Welcome to New Zealand everyone.

by ChrisOfNoFame | 4th May 23, 2:47pm 1683168448

A building consent is not a building start. The consent can sit idle in a filing cabinet for years.

That said, a well capitalised builder (who doesn't need presales!) could start building in 6 months or so. An 18 month completion would land 2 years away. And by then interest rates could be down, raw materials down, and they'd get a good price. If the builder needs pre-sales to get finance they'll be really struggling both with getting buyers and with finance. That said, the savvy buyer will be looking two years away too.

I wonder how many of these consents have been granted to mum & dad developers who thought they'd make a quick buck year or so back. Anyone know? There are lots of RE listings for existing houses with plans and consents attached.

All totally foreseeable of course. I've been waiting for this to get a project off the ground.

by Shaft | 4th May 23, 3:39pm 1683171599

In ordèr to determine the future one has to understand the past... We havent thus...

The higher the rise the lower the fall.

But the fall will be bigger because the stakes are higher, the tools blunter and the decision makers and experts discomobulated

by IT GUY | 4th May 23, 9:24pm 1683192257

Yes yes yes, but the first step in any 12 step programme is understanding you have a problem

by nktokyo | 4th May 23, 5:19pm 1683177562

Called it a year ago when sales off the plans plummeted and I copped flak because consents were still high.

by HouseMouse | 4th May 23, 6:06pm 1683180412

I hear you bro.

No one has wanted to engage with this, including apparently writers on this website who couldn’t , or wouldn’t, engage.

It’s a bit sad, as some of the looming disaster might have been mitigated if the issue was engaged with when it needed to be - 12 months ago or more.

by J Croxford | 4th May 23, 6:30pm 1683181850

This feels like old news, construction industry has been struggling for about 6-12 months

by HouseMouse | 4th May 23, 6:41pm 1683182470

It’s been building (pun unintended), but rather than talking to people in the industry, these articles just rely on lagging data.

Very little value add. People could simply go to the Stats NZ website once a month.

by carda | 5th May 23, 6:07am 1683223647

I predict a big increase in consents for April over March, only because developers wanted to get in before the big price increases caused by the code changes effective for consents lodged after 1 May. Especially the further south you are.

by peter.may | 5th May 23, 9:22am 1683235373

March consents i Manawatu distruct: 9 April consents in same district: 3