Downturn in building consents suggests a steepening slump in construction activity

Property / news

Value of building consents issued in September down $817 million year-on-year

31st Oct 23, 12:11pm by Greg Ninness

The downturn in residential construction looks set to deepen with the number of new dwelling consents issued in September down 37% compared to September last year.

According to Statistics NZ, 2898 new dwelling consents were issued in September compared to 4600 in September last year.

On an annual basis consents are down 20.4%, with 40,408 issued in the 12 months to September this year, compared with 50,732 in the previous 12 months.

That pushed the value of new residential construction work down from $1.867 billion million in September last year to $1.217 billion in September this year, a decline of 34.8% (-$650 million).

On an annual basis, the value of new residential construction has declined from $20.451 billion in the year to September 2022 to $17.461 billion in the year to September 2023, a drop of 14.6% (-$2.99 billion).

All major districts posted double digit percentage falls in the number of dwellings consented in the 12 months to September this year compared with with the previous 12 months, including Auckland -22.3%, Waikato -21.2%, Bay of Plenty -23.5%, Wellington Region -18.3%, Canterbury -17.3% and Otago -19.5%.

The looming slump in construction activity that the decline in building consents signals was not limited to housing, with the value of consents for non-residential buildings down 20.8% in September this year compared to the same month last year.

All up, the total value of all construction work consented in September this year was $2.157 billion, down 27.5% (-$817m) compared to September last year.

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Building consents - residential

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Source: Statistics NZ

Building consents - type

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Source: Statistics NZ

Building consents - growth

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Source: Statistics NZ

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37 Comments

by JRSNZ | 31st Oct 23, 12:27pm 1698708471

The word in my friends group who are in the trades is that Kainga Ora is keeping a lot of the residential new build industry afloat - at least in the Waikato. It would be interesting to see what percentage of the new dwellings consented are linked in one way or another to KO.

by HouseMouse | 31st Oct 23, 12:54pm 1698710088

In Auckland, at least, it’s pretty small

by Matt_09 | 31st Oct 23, 1:35pm 1698712527

Incorrect

by Yvil | 31st Oct 23, 1:50pm 1698713427

It would be nice to support your rebuttal with some evidence Matt. HM has been warning about this downturn for a while and he has been right. I believe he works in the construction industry, so he probably knows what he's talking about.

by HouseMouse | 31st Oct 23, 2:49pm 1698716988

Care to elaborate?

By the way, when I say it’s ‘pretty small’, that’s relative to all of the residential construction activity in Auckland. Certainly KO have purchased a few developments.

by DTRH | 31st Oct 23, 2:56pm 1698717387

Properties for sale in Auckland up 10% in last few weeks , almost back to 12000 many people will be finding the million dollar mortgage no so easy pay going from $900 per week on low 3% rates to now after refinancing $1750 on residential base rate. Many people and investors will try to hold on but will just won’t be able to,many would have borrowed on home they live and it’s going to get very messy as many try to get out without losing everything.

by M0ralHazard | 31st Oct 23, 1:00pm 1698710408

I wonder how long that will last when National gets their feet properly under the table

by Crazy Horse | 31st Oct 23, 1:08pm 1698710880

OK ... when they do get their feet under the table, what are your mates in the Gnats going to do to turn this around ?

Apart from bringing back tax deductions on interest paid by PI's (what about homeowners then ?) ....never bringing in a capital gains tax ...... never implementing rent controls, while continuing with the accommodation supplement., can you list 3 policies they could bring in to "turn this around ?

by Blackbeard | 31st Oct 23, 1:31pm 1698712274

I can name one…

Immigration to the moon, open those gates.

by Crazy Horse | 31st Oct 23, 4:02pm 1698721356

Fair enough ..... but the ones we get in NZ, are the ones where NZ was 5th on their list in the first place - so many of them really would rather go to the USA, Canada, UK and Australia. So the highly skilled and educated would have enough "points"or whatever, to get into the other 4 countries.

So what is NZ left with ? ......uber drivers and short order cooks. Great :)

Also keeps wages down (that's a good or a bad thing, depending whether you are an employer or employee) ..... but puts a load on the health system and infrastructure, so not good economically & socially for the rest of us already here.

by facepalm | 31st Oct 23, 5:24pm 1698726276

Unfortunately the gates are already wide open.

In fact I think the gates may have been taken off their hinges and put in storage by Labour with a small team of hired consultants to keep watch over. Having said that National isn't any better, but the implication that they are currently worse is humorous..

by MLSmith1 | 31st Oct 23, 7:45pm 1698734710

Ultimately immigrants have options besides NZ to settle…those with more skills and resources will have more options… if they are reasonably smart they’ll do due diligence on each nation and compare little old NZ with its housing unaffordability, high crime and poor education.

unfortunately I see nz with the dregs of the immigrant market! Will they support overpriced housing?

by Colin Cameron | 1st Nov 23, 6:50am 1698774653

Actually Canada UK and Aus housing affordability is worst than ours now. And the US has alot of other things going wrong for it like gun crime crime in general opioid epidemic etc etc. NZ does have some advantages that new immigrants want. If not why such a high percentage of high net worth people live in Queenstown/Wanaka etc

by Crazy Horse | 1st Nov 23, 10:18am 1698787123

CC ....compared with Auckland, residential property in Canada (Vancouver) and Australia (Sydney) is more expensive to buy and for rents.

I'm not up to date with the UK.

However, if I had my time again, and I was starting out with my degree, I would try to get into the USA, and having travelled there many times, especially in the last decade, there are and still opportunities, no matter what is happening - you just have to be a bit of a entrepreneur and/or have a marketable skill/qualification. Regarding the gun crime and opioid/drug problems, it's the same as anywhere - it's a huge country, so you just place yourself away from those areas and people.

But my point here is, putting myself in the shoes of a young immigrant family, where both parents are skilled, these people will seek places for opportunities to further their career, grow their business, good schools for their kids, peaceful place to live etc etc ......and let's take the example they couldn't quite get into the USA, they would then look to Canada or Australia, as on these metrics with careers, business, schooling etc NZ would be running last ...... then in NZ, you throw in the highest rent/mortgage payments in the OECD as a proportion of income, over valued houses, also many professional groups want to keep their high incomes, so these groups put up barriers to protect their "patch" , NZ employers love immigrants so they can keep their wage/salary bill down .....so why on earth would they come here ???

So I have said it on here before - we do not get the best immigrant in NZ, while (I know this) they are just waiting to get an NZ passport to move to another country. Also I wonder just how many of these recent emigrants had newly printed NZ passports ???

What a short sighted way to run a country ..... just bring all and sundry in as "cash cows" .....ridiculous !!

by RickStrauss | 1st Nov 23, 10:22am 1698787375

That really highlights how property is NZ's biggest welfare scheme...

by K.W. | 31st Oct 23, 1:28pm 1698712097

KO seem to be buying up completed whole developments from developers for social housing, money is no object. And it avoids the pesky consenting and community consultation process.

by Matt_09 | 31st Oct 23, 1:34pm 1698712453

Yep.

by HouseMouse | 31st Oct 23, 1:36pm 1698712592

That’s an exaggeration. They are buying up the odd Development here and there, but it’s quite limited. Their primary focus is redevelopment of their own estates, and contrary to what you say they have some reasonably strong financial limitations.

by CrispyKahawai | 31st Oct 23, 1:43pm 1698712980

Don't let the truth get in the way of a good whinge.

by K.W. | 31st Oct 23, 3:00pm 1698717613

Financial limitations? Yeah, right lol. I've been in an auction room with them and seen the stupid prices they are prepared to pay for houses.

Secondly, they paid $20M for a development in Huntington and are building in Flagstaff, two of Hamilton's most expensive suburbs. Totally ridiculous. Apparently gang members and drug addicts deserve million dollar houses these days. They could have built houses in cheaper suburbs and saved themselves millions of dollars.

by HouseMouse | 31st Oct 23, 3:29pm 1698719389

The odd $20 million development here and there is bread crumbs when thinking about the health and outlook of the entire residential construction sector.

by RickStrauss | 1st Nov 23, 10:25am 1698787552

The idea of spreading state houses around various different suburbs is to avoid creating concentrated slums in poor areas.

Our older generations of today benefited massively from affordability created through house building efforts of post-war governments, so they should at least be a little more self-aware of their lack of doing it all on their own two feet when they tut-tut at others also receiving help with housing.

That could be the next John Key or Paula Bennett in state-assisted housing too.

by MLSmith1 | 31st Oct 23, 7:54pm 1698735248

Not necessarily… in Rotorua for example, KO buy turn-key developments with open book agreements.

by hum | 31st Oct 23, 12:31pm 1698708711

House Mouse: I told you so! 3 . 2 . 1 ...

by HouseMouse | 31st Oct 23, 12:46pm 1698709575

Haha yeah

and no one cared!

by Zwifter | 31st Oct 23, 1:26pm 1698711993

Well it probably didn't matter with low Covid levels of immigration or even a net outflow, however that turned on a dime.

by Yvil | 31st Oct 23, 1:53pm 1698713592

Well HM did warn us of the collapsing building industry, and he was right...

by riffraff | 31st Oct 23, 12:44pm 1698709492

meet the new slump... same as the old slump.

they don't call it a boom bust industry for nothing.

by Cote d'Azur | 31st Oct 23, 1:16pm 1698711384

Existing Houses are in for many years of soaring values.

Hard-working-multiple-property-owners are well deserving!

by kwbrn | 31st Oct 23, 2:05pm 1698714338

Assuming your existing home was build before 1990. Otherwise you have many years of rotting timber.

by K.W. | 31st Oct 23, 1:23pm 1698711828

Developers cant sell the crappy townhouses that they have already built. Williams Corp are trying to offload theirs into a new "investment" fund called the Completed Homes Fund and promising a 10% return paid quarterly. This is where WC gets to sell their crap at 2021 peak prices to little old ladies, while giving them back their own money as dividends. Its all fun and games until the contributed cash runs out and then they are gated like the Du Val investors and the promised 10% returns becomes 2%.

Another big developer with a 61 townhouse project planned has just put the site up for sale. Paid $12m for it in 2021.

by FCM | 31st Oct 23, 2:04pm 1698714272

Yep WC and Wolfbrook....both doing the same.

by DTRH | 31st Oct 23, 2:04pm 1698714295

If you build it they will come but only when you lower the price by another 20%. The developers will be looking at rates climb and the smart ones will take a haircut before all the profits are gone.

by K.W. | 31st Oct 23, 2:56pm 1698717386

They understand that they need to get rid of their overpriced, low quality new builds before NACT reinstate interest deductibility for investors. Currently that tax break is factored into the price of the property, and once its gone, those new houses will need to drop in price to match the slightly older houses that dont currently have that tax break. Since I'm seeing properties only 5 years old selling today for the same price as they were purchased OTP in 2018 and 2019, that is going to be a hefty price drop coming up.

by IT GUY | 31st Oct 23, 4:50pm 1698724254

this is true and there will be more potential cap gain with the land under older houses, the TownHouse crap is screwed.... another 20% easy

by nktokyo | 31st Oct 23, 5:00pm 1698724851

That ship has already sailed.

by nktokyo | 31st Oct 23, 4:59pm 1698724766

18 months ago sales off the plan cratered and all this was set in motion. I know developers now who are trying to sell finished builds and can't event break even.

Meanwhile Auckland's pop went up what, 2%?

The commerce commission twiddles its thumbs while Rome burns.