The decline in building consents is affecting residential and commercial building projects

Property / news

The number of new homes being consented is down 30.3% compared to a year ago

2nd Oct 23, 11:43am by Greg Ninness

The number of new homes consented in August was down 30.3% compared to August last year, according to Statistics NZ.

Altogether 3170 new dwellings of all types were consented throughout the country in August, compared to 4547 in August last year.

The number of new homes being consented has been tracking downwards since the beginning of this year, signalling an imminent end to the recent residential building boom.

Over the 12 months to August 42,110 new dwellings were consented, down 16.9% compared to the 50,653 that were consented in the 12 months to August last year, and down 9.5% compared to the 12 months to August 2021.

On an annual basis the biggest decline was for stand alone houses, which were down 25.1% in the year to August compared to the previous 12 months, followed by townhouses and home units -12.2% and apartments -7.2%.

Retirement village units went against the trend with a 2.4% increase in the 12 months to August compared to the previous 12 months, but their annual rate of growth is slowing rapidly, down from 11.5% in the year to September 2022 and 25.2% in the year to September 2021.

There has also been a slowdown in the amount of residential alteration work being consented, with $226 million of structural alterations consented in August, down 9.0% compared to August last year.

The value of structural alteration work consented was also down 0.7% on an annual basis, bringing an end to two years of double digit annual value growth.

The news wasn't much better on the commercial building front, with the value of work consented for retail premises in August down 5.0% compared to August last year, while consents for offices were down a whopping 59.5%, warehouses and storage building -12.7% and factories and industrial buildings were -28.2%.

The total value of all non-residential work consented in the 12 months to August, which includes public buildings such as schools and hospitals, was $751 million, down 24.7% compared to August last year.

The total value of all types of building work consented in August was $2.472 billion, down 23.2% compared to August last year.

The interactive charts below show the monthly trends in new dwelling consents by type and region.

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Building consents - type

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Source: Statistics NZ

Building consents - residential

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Source: Statistics NZ

Building consents - growth

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Source: Statistics NZ

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32 Comments

by WestieAJ | 2nd Oct 23, 11:56am 1696200984

New category of receivership sales in the weekly Barfoot email update. The list of distressed sales just keeps getting longer. Are the banks finally getting through the compliance process to wash up their bad deals?

by HughJorgan | 2nd Oct 23, 12:12pm 1696201951

Zero surprises here. Next month will be worse as will the month after that.

Will the slow down result in a cheaper $/sqm rate to build? Maybe at the margins but I can’t see a huge change.

Unfortunately a reset/recession is needed for the sector, more the suppliers than the workers.

by HouseMouse | 2nd Oct 23, 12:22pm 1696202554

The real ‘come to daddy’ moment will be in 2024. So many projects are near completion, and starts are falling off a cliff.

by ChrisOfNoFame | 2nd Oct 23, 12:56pm 1696204612

"Retirement village units went against the trend with a 2.4% increase ..."

Which should surprise no one as only the oldies have any money.

(My aged relative is splashing out on a brand new imported motorhome. Times are tough? Yeah, Right!)

by K.W. | 2nd Oct 23, 10:03pm 1696237429

My father just moved into a RV - and also bought a new fridge, new TV, and has a brand new Kia SUV on order. Meanwhile his savings are in a TD earning a nice 6% interest so plenty of disposable income on top of his pension.

by Cote d'Azur | 2nd Oct 23, 12:59pm 1696204775

Supply Crashing, Demand Skyrocketing.

A$$et Prices Accelerating.

by HughJorgan | 2nd Oct 23, 1:08pm 1696205285

It’s going to be hard to have demand and house prices (Asset Values) going up when people a losing jobs. People consolidate and move overseas.

The construction sector is huge in NZ especially when you include all the related services.

by HouseMouse | 2nd Oct 23, 1:19pm 1696205965

Exactly

by HouseMouse | 2nd Oct 23, 1:18pm 1696205932

Supply isn’t crashing yet, quite a lot of new homes are still to be completed over the next couple of months.

But it WILL crash in 2024. But so might demand.

by danicriss | 2nd Oct 23, 5:38pm 1696221503

I'd believe that in a market where second hand is not desirable. But the majority of the assets trading hands are already existing ones in this market. It's only a matter of owners wanting to put them on the market

Any whiff of prices starting to accelerate downwards and I'm pretty sure there are plenty of investors willing to realise their current paper gains

I'm afraid your theory doesn't quite hold

by Stephen06 | 2nd Oct 23, 1:02pm 1696204962

The decline in building consents is affecting residential and commercial building projects

One of the main causes of building consent decline rests with councils and the increasing time council officers are taking to process consents.

The building consent rules are increasingly complex and should be simplified into a code to minimise subjective elements of the consent process. Is that too much to ask?

by HouseMouse | 2nd Oct 23, 1:22pm 1696206161

Although the consent processes need a lot of improvement, by far the biggest reason for building consent decline is the cost of finance (a double whammy as it affects both developers and potential buyers of their product)

by nigelh | 2nd Oct 23, 6:32pm 1696224767

"increasing time council officers are taking to process consents." A clear case of the job expands to suit the time available. With consents down officials can see the work drying up so extend the consent time for new and existing consents.

Yes. Once you give officials discretion it can lead to all sorts of time wasting and open to bribing. More black and white reg/rules required.

by HouseMouse | 2nd Oct 23, 1:27pm 1696206460

I don’t think most people realise how significant this is, given construction and related sectors are so important to the NZ economy. It’s building towards my prediction of a 40% fall.

by Rumpole | 2nd Oct 23, 5:36pm 1696221399

House Mouse - Looking at commercial property sales in LA & SF were tower blocks in default are selling at 70-80% discount of valuation suggests that low occupation rates reflects work at home/reduced consumer spending (a lagging indicator) that asset prices reducing 30-60% not impossible - is NZ any different??

by Property Leader | 2nd Oct 23, 1:30pm 1696206614

I am one week off getting an up market new build completed. On the basis of what I have paid I fail to see why anyone would want to build new. Secondhand houses are way cheaper now. Council delays picking holes in this and that along with engineered over kill just about did me in. Prospective new tenants beating at the doors many of whom have just arrived from India, Russia, and where ever make up some of the good new tenants. Regardless of who gets in I see no let up in rent increases.

It took me an hour standing in a slow moving short line to cast my vote this morning. Not even a chair to sit on while I waited. Is this another nasty plot by the government on our democracy.

by K.W. | 2nd Oct 23, 10:08pm 1696237718

The place I voted at last election isnt a polling place this year, which is a shame as it had heaps of car parking (being a church). I also wondered if only using polling places with no car parking on offer was part of a Govt plot.

by Final Account | 2nd Oct 23, 2:01pm 1696208499

Be interesting to see where HNZ/KO consent value sits amongst all of this. The number of social housing developments has taken off. Opportunity for Resi contractors to step over into KO contracts, developer just needs to have deep enough overdraft to weather KO late payments, as their admin is a total mess (like most of the Govt.).

by HughJorgan | 2nd Oct 23, 2:05pm 1696208756

My understanding is that KO are pulling back so I can’t see it ramping up. And no doubt they will get pretty blunt orders post election.

Government spending is meant to help by being counter-cyclical. Instead they have driven up prices and creates more of an issue.

by HouseMouse | 2nd Oct 23, 2:10pm 1696209058

Correct, they are pulling back. And 100%, they should be counter-cyclical but they aren’t. Useless.

by Pa1nter | 2nd Oct 23, 3:00pm 1696212000

From my limited vantage point, it looks like the bulk of their forward works are in trying to get themselves compliant on their existing stock with Healthy Homes. Their self imposed deadline is rushing up fast, and theyve barely scratched the surface.

At the rate government makes decisions there isnt a lot of ability to be counter cyclical. By the time they witness a turn in activity and decide what to do about it, then run it through the planning process, things have moved on.

by Spiceeh | 3rd Oct 23, 9:16am 1696277799

Homelessness is not counter cyclical.

by MikeM | 2nd Oct 23, 2:15pm 1696209323

Wait til we get past Christmas and into next year; it's going to be worse that what we're seeing now. We'll find out who has the deepest pockets in the building industry.

by HouseMouse | 2nd Oct 23, 2:31pm 1696210300

Even the ‘good’ successful developers like Ockham are struggling now.

by Officebound | 2nd Oct 23, 6:20pm 1696224008

Williams corp has to be hurting.

https://www.williamscorporation.co.nz/development/?slug=66-wharenui-road

By my count, there are 80ish completed units, and over 40 still for sale.

by HughJorgan | 2nd Oct 23, 8:32pm 1696231931

The Fund Manager for WC (Richard Carr) is really pushing repayments that have been made and that they have not lost any capital since inception.

Minimum investment of $100k so if it fails is going to hurt a few people.

by K.W. | 2nd Oct 23, 10:15pm 1696238148

Minimum investment was $50k and they were taking money from little old ladies living in over-60s units. Not exactly screaming "wealthy sophisticated wholesale investors". Its always fun to google the addresses of their "investors" lol.

by K.W. | 2nd Oct 23, 10:12pm 1696237960

They are trying to flog 1 bedroom units in Christchurch for $639k. Good luck with that at 7.25% interest rates!

by HouseMouse | 3rd Oct 23, 7:55am 1696272942

Yeah….

by Nzdan | 3rd Oct 23, 7:38am 1696271917

Everything else aside, what I do find is that Williams Corp tend to build properties that visually look half decent.

by nigelh | 2nd Oct 23, 6:36pm 1696224989

"The number of new homes being consented is down 30.3% compared to a year ago"

Good. Maybe we'll get better and sharper responses from trades people. Have had it too good for too long.

Partly due to emphasising degrees over the last two decades instead of trades. Most BAs stand for "Bugger All"

by Just a farmer | 3rd Oct 23, 10:23am 1696281798

I have been looking to upgrade our house, and it is more of a case of lack of sections available around me in the north Waikato.

Lots of small sections available from Kainga Ora, but very little choice for anyone looking to build a larger family home.

The cycle seems to be starting again though, 2 new large subdivision developments started in the last couple of months, so hopefully more choice of sections available next year.