Building consents rise 9% in November from October, helped by retirement village apartment demand, Stats NZ figures show

The number of seasonally adjusted building consents for dwellings rose 8.8% in November from October, buoyed by consents for retirement village units, Statistics New Zealand said today. There were 1,268 consents for dwellings, figures show, up from 1,165 in October.

However, removing the volatile apartment category, which was dominated by consents for assisted living apartments associated with retirement villages, the number of consents for new dwellings fell 2.6% from October, Stats NZ said.

The trend for consents excluding apartments had fallen steadily, declining 22% since the recent peak in March 2010, Stats NZ said. The current level was 53% lower than the series peak in September 2003.

The value of residential building consents was NZ$514 million in November 2010, down 4.4% compared with November 2009, Stats NZ said. The value trend had been declining since April 2010, and had fallen 14% over this period.

Unadjusted figures show there were 1,470 dwelling consents in November, down 2% from 1,500 in November 2009.

There were a small number of earthquake related consents in Canterbury in November 2010, Stats NZ said. "The total value of these was NZ$2.3 million. Two of these were for new dwellings," Stats NZ said.

'Significant risk of housing shortage if issuance doesn't pick up'

ASB economist Chris Tennent-Brown said residential building consent issuance remained weak, with the November total only held up by a high number of apartment consents.

"The current level of consent issuance is broadly consistent with our weak residential construction forecasts for late 2010 and early 2011. However, if we do not see a pick-up in consent issuance over the coming year, there is a significant risk of a housing shortage in the years ahead," Tennent-Brown said.

"Over the coming years building consent data will be significantly affected by the Canterbury earthquake. Beyond Canterbury, our forecasts contain a weak lift for the construction sector. Weak population growth and a low level of activity in the housing market, means there is little in the way of a catalyst beyond the earthquake to stimulate a pick-up in residential construction activity in the near-term," he said.

"The RBNZ’s near-term outlook for the domestic economy is subdued, and in the December MPS the Bank expressed surprised with how little traction low interest rates were having on the economy, including the housing market.  We now think that the RBNZ will wait until June before it hikes the OCR and we expect it will only hike at Monetary Policy Statements over 2011 (i.e. one hike every 3 months)," he said.

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Here is the release from Stats NZ:

Mixed results for building consents

In November 2010, the value of consents issued for non-residential buildings was $479 million, the highest value since May 2009, Statistics New Zealand said today. The two main contributors to this value were education buildings, and factories and industrial buildings, bringing the non-residential buildings value up 23 percent compared with November 2009. In contrast, over the same period, the value of residential buildings decreased by 4.4 percent to $514 million.

The seasonally adjusted number of new housing units authorised, excluding apartments, fell 2.6 percent in November 2010, the fifth consecutive monthly fall. When the volatile apartment category is included, the number of new housing units authorised rose 8.8 percent, following a 1.8 percent fall in October 2010.

In November 2010, without adjusting for seasonal effects, consents were issued for:

• 1,470 new housing units, including apartments
• 1,244 new housing units, excluding apartments
• 226 new apartments (154 are assisted-living apartments associated with retirement villages).

In Canterbury, there were a small number of earthquake-related consents identified in November 2010.

The total value of these was $2.3 million. Two of these were for new dwellings.

Building consent values include goods and services tax (GST), which increased from 12.5 percent to 15 percent from 1 October 2010. It is not possible to separate the impact of this change on building consent statistics.

Data for building consents is obtained each month from all territorial authorities.

Here are ASB economist Chris Tennant-Brown's comments on the figures:

Residential Consent issuance

Residential consent issuance remains weak, with the November total only held up by a high number of apartment consents. The current level of consent issuance is broadly consistent with our weak residential construction forecasts for late 2010 and early 2011. However, if we do not see a pick-up in consent issuance over the coming year, there is a significant risk of a housing shortage in the years ahead.

Earthquake reconstruction in the Canterbury region is one positive for residential construction. Some clearing of the backlogs due to September’s disruptions may have been behind the October and November lift in Canterbury consent issuance. We expect that it will take many months to assess the damaged houses in Canterbury and it is likely that the actual consents to build replacement houses will flow through into consents issued over the coming year.

Non-residential consent issuance

Non-residential consent issuance was high in November, with the value of consents issued the highest since May 2009. The value of consents issued for the three months to November are now up 14.5% on the corresponding period a year earlier. The lift is encouraging, given the very low value of non-residential consents issued during most other months in 2010.

Implications

Over the coming years building consent data will be significantly affected by the Canterbury earthquake.  Beyond Canterbury, our forecasts contain a weak lift for the construction sector. Weak population growth and a low level of activity in the housing market, means there is little in the way of a catalyst beyond the earthquake to stimulate a pick-up in residential construction activity in the near-term. 

The RBNZ’s near-term outlook for the domestic economy is subdued, and in the December MPS the Bank expressed surprised with how little traction low interest rates were having on the economy, including the housing market.  We now think that the RBNZ will wait until June before it hikes the OCR and we expect it will only hike at Monetary Policy Statements over 2011 (i.e. one hike every 3 months).

(Updates with ASB comment, links, release, chart)