Jan building consents down 17% from year ago; monthly trend still negative, Stats NZ figures show

The number of new dwelling consents authorised in January was down 17% from the same month a year ago, although seasonally adjusted figures show there was a 10% rebound from December, Statistics New Zealand said.

There were 867 consents for new dwellings during the month, down from 1,042 in January 2010. Of that, 90 were consents for apartment units (up from 42 in Jan 2010), while 777 were for other dwellings (down from 1,000).

Seasonally adjusted, there were 1,126 dwelling consents during the month, up from 1,027 in December. The trend in consents, which is based on seasonally adjusted numbers, remained negative in January and has been falling since May 2010. However the negative trend has been easing since August 2010.

Here is the release from Stats NZ:

In January 2011, the value of residential building consents fell 19 percent compared with January 2010, Statistics New Zealand said today. (Note that data in this release is for the month before the February 2011 Christchurch earthquake.) Although there was a small rise in non-residential consents (up 2.3 percent), the value of consents for all buildings fell 11 percent to $537 million.

“January commonly has a low value of consents issued when compared with other months, but at $537 million, the latest value for all buildings is the lowest for any month since February 2002,” business statistics manager, Louise Holmes-Oliver said.

In January 2011, consents were issued for 90 new apartment units and 777 other homes. This gives a total of 867 new homes authorised, down from January 2010, and the second lowest total in any month since the series began. The long-term trend indicates the number of new homes authorised has been in decline since early 2010 – and is down 23 percent since then.

Fewer new homes were authorised in 12 of New Zealand’s 16 regions in January 2011 compared with January 2010. Numbers fell 17 percent in both the North and South Islands.

In Canterbury, 30 consents related to the September 2010 earthquakes were identified in January 2011, including five new dwellings. The total value of these was $4.5 million.

Here is the reaction from ASB economist Chris Tennent-Brown

Canterbury Earthquake

Canterbury consents of 207 dwellings contrasting to 209 in October, and the monthly average of 247 units in the year prior to the earthquake (all figures seasonally adjusted).  30 earthquake-related consents were identified in the January figures, including 5 dwellings (figures unadjusted).

Prior to the February earthquake in Canterbury, reconstruction activity from the September earthquake was underpinning our construction outlook for 2011.  Earthquake-related consents (from the September quake) have not shown up to any significant degree in consents for the months from September to January.   

We had previously expected that building consents would be picking up over the coming months as new homes were consented. We had also expected that building activity in Christchurch would be starting to pick up in the early months of 2011.   The increased scale of destruction following the February quake now means repair work is unlikely to get underway in a meaningful sense until late this year.  

Implications

Outside of Canterbury, the current national level of consent issuance is broadly consistent with our weak residential construction forecasts for late 2010 and early 2011. However, we expect that residential building consent issuance will pick up gradually over the year.  Furthermore, if consent issuance remains at the current low level for too long, there is a significant risk of a housing shortage in areas where the population is growing and more homes will be required in the years ahead.   

For the RBNZ, the immediate concern is the impact of the Canterbury earthquake on an economy which was already frustratingly weak.  We expect the RBNZ to deliver a 50 basis point rate cut at the March 10 announcement.

And from JP Morgagn economist Helan Kevans:

The building permits data in New Zealand fell much in line with expectations. Permits rebounded in January, rising 9.6%m/m (J.P. Morgan: +8.5%; no consensus), following an 18.2% drop in the previous month. The result marked the biggest increase in two years, and follows other stronger data over the last week, including the terms of trade reaching a 35-year high, the trade balance moving into surplus for the first time since mid-2010, and a significant rise in Fonterra’s forecast payout to dairy farmers.

The underlying story in the permits data was weaker than the headline suggested, however. In value terms, permits hit an 18-year low and, while January is typically a low month for consents, this year was the lowest since February 2002. Further, the trend in the number of new permits issued now has declined 23% since April 2010. Only 867 homes were authorized in January, marking the second lowest total on record.

Non-residential permits also remained weak, rising a mere 2.3%m/m in value terms, and falling 3.9% based on floor space. These permits have stepped down a notch after reaching an 18-month high in November. It was then that approvals for education buildings, factories and industrial buildings spiked higher, which we believed owed to firms and government bodies pushing through rebuilding projects faster than individual households in the wake of the September earthquake. This was short-lived, however, with only 30 permits identified in December and January as relating to the 2010 earthquake in Canterbury.

We suspect that, following the most recent earthquake in Christchurch in February, earthquake effects likely will take some time to filter through to a rise in permits. We expect permits will slump in February, and possibly again in March, before picking up significantly later in the year.

(Updates with economist comments)