Building consents for houses, apartments fall 9.7% in Feb to 2 year low, Stats NZ figures show

By Alex Tarrant

The number of building consents issued in February 2011 for all dwellings fell by 9.7% from January to their lowest level since January 2009, Statistics New Zealand said today.

The fall was bigger than economists had expected, with ANZ saying before the release that the market was expecting a 1% fall after a rise of 9.1% (revised from 9.6%) in January from December.

The downward trend in consents since April 2010 mirrored an economy that struggled and grew smaller in the third quarter of last year, before bouncing back in the fourth quarter ever so slightly to show flat growth in the second half of 2010.

JP Morgan economist Helen Kevans said she suspected the downtrend in consent issuance would continue in the wake of the February 22 earthquake in Christchurch, given the slow rate at which earthquake-related insurance claims were being processed.

"Indeed, earthquake-related rebuilding cannot get underway until claims have been processed by insurers, and this process has been delayed by a lack of information on land remediation, which aims to prevent lateral spreading of any future quakes," Kevans said (see her full remarks below).

Two year low

Seasonally adjusted consents for all dwellings – houses and apartments – fell 9.7% to 1,007 in February, the lowest figure since January 2009.

Excluding the volatile apartment category, consents for new houses fell 7.8% to 923 s.a., the lowest since February 2009, Stats NZ said.

“Looking at the longer-term trend, the number of new houses authorised, excluding apartments, has continued to decline, and is down almost a third since the recent peak in March 2010,” Government Statistician Geoff Bascand said in a media release.

“The trend is similar when apartments are included – it has declined 26% since April 2010,” Bascand said.

 Unadjusted figures show 884 consents for dwellings, excluding apartments, in February 2011, down 35.1% from February 2010.

There were 89 consents for apartment units in February, up from 13 in February 2010. Stats NZ warns the apartment category can be extremely volatile.

Earthquake effect

Unadjusted figures also showed 148 new dwellings were authorised in the Canterbury region in February, 101 fewer than the same month a year ago. This was the largest year-on-year fall for any region, Stats NZ said.

“It is not possible to say how much of this fall was due to the earthquake on 22 February, but all consents authorised during the month have been included,” Bascand said.

Consents for three new dwellings in Canterbury were due to the September 4 earthquake that struck the region, with 13 other consents from other categories recorded as due to that quake.

Economist reaction

Here is the reaction from JP Morgan economist Helen Kevans:

The permits data recently has been particularly volatile, but the underlying trend has been one of decline over the past year. The trend for the number of new dwellings authorized has fallen 26% since April 2010, and is 31% lower excluding the most volatile apartments category.

We suspect this downtrend will continue in the wake of the most recent earthquake in Christchurch on February 22, given the slow rate at which earthquake-related insurance claims are being processed. Indeed, earthquake-related rebuilding cannot get underway until claims have been processed by insurers, and this process has been delayed by a lack of information on land remediation, which aims to prevent lateral spreading of any future quakes.

In February, 148 new homes were authorizedin Canterbury, 101 less than a year earlier. Statistics New Zealand highlighted, however, that it was not possible to estimate how much of this fall was due to the February quake. Furthermore, very few building consents were identified in February as related to the previous earthquake that hit Canterbury in September 2010. Only 16 consents relating to the September earthquake were identified, a very small portion of the 973 permits authorized over the month. Of the 973 permits authorized in February, 884 were for dwellings and 89were for apartments.

Non-residential permits rose 32%m/m in value terms in February, but fell 13% based on floor space. Over the year, the value of non-residential permits fell markedly (-19%oya), owing to sharp declines in social, cultural, and religious buildings, education buildings, and offices and administration buildings. These permits have stepped down significantly after spiking to an 18-month high in November. It seemed back then that firms and government bodies were pushing through rebuilding projects faster than individual households in the wake of the September earthquake, although this dynamic was short-lived.

The chart below tracks unadjusted figures.

The chart for consents by region can be viewed here.

(Updates with JP Moprgan comments)

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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106 Comments

It'll be the lack of available land that's causing the drop in building consents. That'll be your problem right there...or the surge in immigrants, that always causes building consents to drop.

Or could developers just maybe have run out of customers, eh?

Before your boom W expect to see a deeper bottom that is likely to extend some ten years...likely as not you will call any blip up as a sign that your boom has arrived..The low rates are going to give way to much higher rates. As you say..."just you wait"...and then watch as prices fall and fall....as they are in the states...and the uk...and aus....and Japan...and across all of the piigs...

Olly was right as usual. He drew attention to the continuing dismal statistics and what they mean in his last article "The Game Changers" as well as in many previous artcles.

His website says it all:

http://www.ollynewland.co.nz/582/582

"The latest building consent data drive home the dismal flow-on effects of a flat recession- plagued market , encouraged by Government moves to hike GST and discourage investment.

It confirms my oft repeated view that we are heading for a major shortfall in housing stock which will be exacerbated by the losses from the Christchurch earthquake, leaky homes etc. On the flip side it must eventually mean rising prices and rising rents in the not to distant future . Investors take note."

Thus endeth the lesson.

The lesson is only just starting, BigDaddy. Why aren't the mass builders building? Becasue they know they can't sell what they will produce, at the end of their lead-time; even at break-even to keep the workforce togther. Add, 'no reason to build' to ' increase vendor supply ( that's actual; pending and Grey- Bank-market) and it's all downhill for prices from here.)

You like links. So here's one about consents issued/pent up vendor supply in the US ("As we’ve stated repeatedly in many, many past Insights, excess inventories are the mortal enemy of house prices".) Admittedly, and they can't control their housing market like we can! We're different...

http://www.businessinsider.com/gary-shilling-house-prices-2011-3?op=1

FFS we are NOT the USA, comparison not applicable...jeez 

So you reckon we know better than the States, do you! It's not whether we do or do not, actually. It's about "what happens to them", and the other deveoped countries. If you think NZ is going to be 'ok' if they fall in a heap....well Good Luck with that....

It's not that "they can't sell what they produce", it's that they can't produce in spite of the demand...

The RMA has stopped development - apartments are not allowed to be built in the CBD or Newmarket since PC2 and PC 196.  Developers would love to build in these areas but are not allowed to.  The RMA process to build anything more than 3 units in Auckland has become so expensive, uncertain an complex that an increasingly small number of developers (out of those that survived the last 4 years) have experience and resources to acheive consents.

Finance - you may not have noticed but the companies that financed development are gone.

There are currently 315 CBD apartments on Trademe today - 30% of the usual choice.

There are only 1274 Trademe rental listings in all Auckland city - this is unprecedented.

The concept that making houses more expensive (through tax, discouraging building and investment etc.) will lead to cheaper housing is patent rubbish.  If you want cheaper housing you need oversupply which, as you have noted, is how they have got cheaper housing in the States.

bob...some very interesting observations.

The restrictions on new dwellings in the CBD will, if maintained, severely affect availablity of housing in the area.

Agree with your Trade me comments.

"The RMA has stopped development - apartments are not allowed to be built in the CBD or Newmarket since PC2 and PC 196."

Its probably just as well apartment blocks aren't allowed to be built in Auckland considering its vulnerability to volcanic activity. Its probably just as well that developers who can't navigate through a mere regulatory process can't build.

In any case nobody wanted to build in the aftermath of the recession and the "financial crisis" as I remember news articles back in 2008 talking about panic sales of apartments in complexes, some of which were mortgagee sales. Its a bit rich for people to blame the council for the lack of housing when it was due to the economic fundamentals that made developers reluctant to build.

"Banks tightened their lending policies, particularly for smaller apartments, which made it difficult for investors to borrow. Many existing apartment owners tried to sell. With the high number of mortgagee sales, some lost up to 40% of their purchase price."

"In 2009, there were only 120 consents issued. Almost no buildings have gone ahead since then."

http://www.landlords.co.nz/read-article.php?article_id=3689

The new planning code appears to contradict your assertion that apartments as they INCREASED the permitted maximum height. Surely the higher the apartment, the higher the risk of its prospects would be, no? Auckland is not Shanghai or New York. Sure migrants prefer inner city living, but we can't rely on Asian migration to be our economic panacea forever.

The residential 8c zone allows for five-storey developments up to a maximum height of 17 metres and includes controls for minimum bedroom sizes and the maximum number of studio, one and two bedroom units allowed in a development

- increasing the maximum height of buildings in Newmarket’s business 3 zone, which includes Broadway, from 30 metres to 34 metres

- raising height limits in Newmarket’s mixed-use zone from 15 metres to 21 metres and to 27 metres on Khyber Pass Road

- increasing the development potential of mixed-use areas by allowing a higher ratio of floor space to lot size. The floor area ratio for mixed use areas increases from 2:1 to 3:1

- re-zoning existing business 4 areas, including the 5.3ha former Lion Brewery site, to mixed-use.

Ask yourself: "Why are the banks not lending to the developers?". My answer would be "That it's too risky- the product they develop may not get sold and enable the loans to be repaid". If there were 'customers', for the developers then banks ( being in the business of lending money to make money) would be supporting the industry. They aren't and won't for some time - because it''s too risky. Oh, and there isn't and won't be a housing shortage. We have 2.35 people per houshold in this country - an historiacal low. Push that up to an even 3 and there will be tens of thousands of properties vacant in this country, all earning no rent and accummmulating costs. What will that do for the level of rents?

 "now is the perfect time to be getting into property development."..harrrrrrhahahaha...sprook away sprooker...it will not change the trend...down we go...all the way and then some....enjoy the fall...

Quite right NA...it is so easy to slap up a barrier wall and cut a big old house in half...bung in a kitchen and dunny..hey presto room for 2 .........or just rent out a room if you are lucky enough to have a spare bog.

Landlords hate this sort of trend...they hammer away to get restrictions and red tape produced to prevent it. Fat chance.

Wonder how many I could fit into the garage.......

Check other business news sources.  Auckland is expecting more internal immigration and not many new houses being built in Auckland region, therefore a mini boom is not unexpected in Auckland.

I am not an expert (others people in this forum might claim to be one) but in 5 years I'd love to say "told you so"

Moa is probably right...about Auckland..which is 'across the ditch' as far as those in the regions are concerned...the inflow generating more inflow....leading to slum towers and more crime...

The Chch rebuild set to taper off around 2025!...will drive building input prices ballistic and bugger what building work was maybe going to happen in all the other regions.

Not that the govt will give a hoot...heaps of gst to harvest...

But Wolly you totally miss the point.

All the countries you mention have ( or had, in the case of Japan) a huge over hang of properties.

We have just the opposite.

Back to the drawing board and next time try harder.

"A hangover"....that's what I see in Marlborough BD...and throughout the regions...there is no shortage...other than in your imagination..haha

ummm in NZ I don't see many un-occupied (abandoned) properties like they have in many states of the US and in some parts of UK..  

Here's an example of 'hangover', BigDaddy. In 2007 I had a chat to our rubbish collector. He was becoming a 'property developer' and was putting his 13 newely constructed houses on the market. He got those away Jan/Feb. 2008 to 'M&D "property investors", and launched into 20 more. I have no idea how they went. But that's potentially 33 speccies....done by the... garbage collector. Not done by you or Olly or a professional....and I can guarantee you, he wasn't on his own!

They would have been 33 top properties NA...he wouldn't have bought any rubbish........

"If you can't see it,  I don't paint it"  and " You don't need to use treated timber, inside"  stick in my mind !

Nick, you have mentioned here a person in the building-to-sell market. That activity has almost ground to a halt.

But their demise has consequences. 

And the property investor (not developer), in for the long term, will benefit hugely from those consequencies, with rising rents and once again rising house prices further down the track.

You must relise there are different markets at work here, and, to be honest, the clever buggers are in the investing market.

So get in there while you can.

They say no one rings the bell when it's time to buy. Well, I'm ringing it for you right now. 

But why did it grind to a halt, Your Landlord? That's right! Because 'they' couldn't sell what they had produced; otherwise it would still be going garbage-man ganbusters. Ditto, the Building Consents- there is no forseeable demand for their produce. Tell me how rents are going to rise if wages do not? And if your answer is "But Wages will rise" Tell me how; in an economy that has just this very day had to increase its borrwing quota to keep us afloat! We can't sell whatever it is we make with current labour cost. How do we do it with higher ones?

Its called a cycle NA.

While times are tough out there the world isnt going to end. Its a case of head down and get on with it.

Spot on, Kermit! But this cycle has no where near completed. The really bad bits; the bits at 6 o'clock ( or is that half past the hour?!) on the Life Cycle Graph are yet to come. Are we at quarter past ,or 25 past? We shall see . Only when we have 'reverted to mean' will be be at 25 minutes to the hour..... :)

Rents, as a percentage of wages, have been low in recent years eg 22-23%

Long-term they are around 28% of wages.

Plenty of scope there Nick, for rents to rise within the current wage level.

And remember the available worker pool is shrinking, even in China. Wages wont stay at the current level forever.

Err....No. The gap between 'what % was, and what % is' has been filled with other expenditure. Now all discressionay and utlity costs are rising into an income that is already fully appropriated. Rents as a % of income can only fall, as other imperatives ie: eating ,come first. But you're right about Chinese wages rising. That goes with my other longheld belief, " Fusionflation" or East meets West. That's ~ their wages rising/ours-The Wests, falling until they fuse. How else are 'we' going to get our manufacturing base back? Only by competing with the one resourse common to both cultures - labour. Why is there discontent in European labour markets? Because their wages are being cut.....what was it 12.5% in the Irish public service...

Updated with JP Morgan comment:

JP Morgan economist Helen Kevans said she suspected the downtrend in consent issuance would continue in the wake of the February 22 earthquake in Christchurch, given the slow rate at which earthquake-related insurance claims were being processed.

"Indeed, earthquake-related rebuilding cannot get underway until claims have been processed by insurers, and this process has been delayed by a lack of information on land remediation, which aims to prevent lateral spreading of any future quakes," Kevans said.

This is despite govt giving itself the power to overule every law in order to speed up the rebuilding process.

But don't worry, after only a month of deliberating, Gerry's decided to set up a committee to discuss the issue, then write up a document for government consideration on how to speed things up.

Last week on the telly I was watching scenes of temporary housing being built in Japan - the new places had  basically been built in a few days.

Well, nothing new in these house building figures.

They do confirm the facts though. The house-building industry is deeply recessionary and continuing to be so. While house sales are low, new house consents will also remain low.

So what will result from many months (actually about three years now) of falling new housing construction?

Yes, a shortage of dwellings, which is facing a growing demand from people wanting places to live. As employment improves, that demand for dwellings will only get greater.

We are seeing this demand already, in rising rents and a firming house price market.

As a long-term landlord, the lack of work for developers and builders means my houses are more sought after as there are less of them relative to the population.

Things look very promising for property investors now. They will see increasing demand from tenants as the shortage bites further, leading to rising rents and then rising house prices. Buy and hold property now, you will not regret it.

Not too long before it's my shout boys! 

 

Is that you, Duke?

Gee no meh.

The Duke seemed angry. I am a vey happy, contented PI.

In fact with reports like these most recent new dwelling figures I am feeling on top of the world.

Perhaps Nick Arrand is The Duke, as he seems grumpy these days!

Your Landlord may have views that conflict with mine, but at least hes polite and can actually have an arguement without raging. What I will say Your Landlord is that your lot ALWAYS think they are right and any data, no matter how horrible it is, will always in some way be good for the property market. I find this extremely odd.

More to the point is they only consider property in isolation. It becomes a bit tiring after a while.

Muppet King, thanks for the comments. I do not dispute that this data is bad. If I was a developer, a trader or a speculator in property I would not be a happy person right now.

Far from it as there is little money to be made in those activities right now, nor for a long time since.

But I am not any of the above. I only operate in the market as an investor. And, as an investor, if people are not building houses, I believe my existing houses will gradually become more valuable to me.

This makes me happy of course, and so I see this data as favourable to me given the way I operate in the property market.

Believe me Muppet, if the article was one about record numbers of houses being built, I would not be happy. All that competition against me...yuk.

Just for you, I will try to find some property data and complain about it! (But really, that's not much in my nature to complain).

Net migration is about 15,000 p.a.? That looks to be about equal to annual building consents so building is covering immigration. So no problem, the figures simply indicate that there is no property speculation going on or replacement of existing stock.

There might be small localised increases in rental demand but not country-wide. There is also the problem of peoples' ability to pay high rents.....

So when are these house price increases going to start? 

We have had falling and very low consents for last 4 years. Is 4 the magic number where all of a sudden the 'lower than boom years' number of consents translate into this mythical housing shortage?

Last october many called the bottom, and yet sales volumes and prices have still been declining. 

Give me a statistic that indicates a housing shortage in NZ. (not just in central auckland a few months out from rugby world cup...)

I have tried in the past, and there simply is not any evidence to back this up. John Key says there is no shortage either. 

During the 'boom' construction went crazy and now there is no demand for property so none is being built. Same as has been the case for last few years, all the while prices have been going down.

Watch houses to rent in Auckland on Trademe for 6 months.

Houses to rent ,is a function of velocity. ie: if people don't move they neither need a new rental, nor put their old one back into the rental pool. In its extreme, there could be no houses for rent in Auckland on TradeMe, and no shortgage of rentals, if everyone just stayed where they are.

Nick, you persistently underestimate the demand side of the housing market.

It's this demand side that will blind-side your predictions and see you paying more and more rent.

You play a dangerous game staying as a renter long-term.

4 houses 8 people ~ two per house; all houses full.... 8 per house (Whoops! The landlords just put up the rent on our last places!)....3 houses empty. Our dwelling ratio is just 2.35, historically low. Just making it 3 puts 100,000 houses vacant in the country. How do those empty 3 get tenants, You Landlord? Easy! Drop the rent until the ratio eases. Sorry...I've underestimated something....what was that?

Your scenario is accurate in the short-term rising unemployment environment we have had in the GFC.

But as employment increases, people spread out again.

And they will meet a contracting new dwelling market. Result...fewer houses to move to, less houses vacant.

I have bad news for you. Unemployment is not going to decrease in any meaningful way. What is it that we do that can't be done faster, better, cheaper (and anyhting else you want to mention), than in Asia? How many new people are you taking on? How much of a wage rise are you giving to your people? Absolute numnbers of the unemployed may drop, becaseu they'll relaotae to...Australia. That just leaves their previious accommodation empty, or competing for a new tenant at a lower rental point.

No, people do move and their circimstances change.  The population is increasing.  Visit Statistics NZ website and graph population growth versus consents for dwellings over the last 10 years in Auckland - you will see that even in the 'boom' construction was not keeping pace with population growth.

For movement to work there should be around 4% available (800-900 like there has been for years) or something is out of kilter - perhaps the fact that building CBD apartments was banned in 2006.

Why is the polulation going to increase, just because it has in the past?

 "...three-quarters of New Zealanders would be willing to move for the right job, with many prepared to relocate to another country.."

http://nz.finance.yahoo.com/news/Difficult-keep-skilled-irnnewstalk-834513484.html?x=0

Sex, internal migration, immigration and because Statistcs NZ (who's opinion I value much highr than yours) says so.

Nick, NZed's population is growing. You can't dismiss that growth with one comment by an employment agency looking to drum up business.

Once again you disparage the demand side of the housing equation.

What's it growing with? Natural increase ( more births than deaths - babies don't buy houses!), and student numbers ( they are classified as LTPA until they leave, but even those numbers are headed down with the value of our dollar and the earthqake). What is your Government doing to the Pubic Service? Shrinking it. Are they going to import more people in the face of a downsizing of their own payroll? I doubt it. Immigration is likely to take a pause for some time until we have repostioned the current worforce that is about to loose its jobs.

Oh. And those previous babies ( the Pigs in the Python, so to speak) that are now house buying age? Guess what. They can't afford to buy with the student loans etc that they have been burdend with. Not to mention the current entry point of a home. When prices have fallen, they will be able to buy. Not until then.

In spite of your irrational arguement I still value Statistic NZ's and ARC opinion more highly than yours - Auckland population 2 million within 25 years.

NZ's private debt is similar to all the countries currently getting downgraded. 

Private debt used almost exclusively for housing. 

How is it possible for house prices to increase when international rating agencies and the govt are telling us we are on the verge of downgrades unless we REDUCE this private debt used for housing. 

The agencies have told us to use land taxes and cap gains taxs, they see our borrowing to buy houses as THE problem in our country. 

We have hit peak debt. There is only one way to go now. It will happen slowly over many years. Developers know this and are not buying overpriced land for new developments because it simply does not make economic sense. 

The agencies are stupid.  you do not make houses cheaper by making them more expensive (incresed taxes, CGT etc etc.).  Making them more expensive makes them more expensive.

Neither are rents or prices constrained by income - the poorest miss out or cram in.  Visit Delhi where incomes are a fraction of here, but prices highter.  A family doesn't rent a house, they rent a room in a house.

Learn from Florida.  If you want cheap houses simply let there be an oversupply.  Supply and demand DOES affect prices.

You may be confusing public and private debt.  Surely "The agencies" are talking about finding money somewhere, anywhere, to reduce government defiecit.

Who owns that Public Debt? You do, I do. The only way to reduce Public Debt is for us, the 'privates' to pay it down. That's more taxes and less services for all of us.

But as a tenant, do you deserve any council sevices? Are you paying for them?

"But as a tenant, do you deserve any council sevices? Are you paying for them?"

Very generous of you YourLandlord, for paying the cost of the rates for your tenants yourself. You deserve a medal. Most Generous Landlord in New Zealand.

Thank you Anarkist.

Told you landlords were a damn good bunch...

NA - you are living in an aprtment and may be blinded by that - there's a huge different in the apartment and the "normal " house rental market.  I recently signed up a tenant in our own home.  Had a number of people going thru' the open home and half were apartment dwellers who are trying to get out!

Perhaps, Chairman Moa. But before "here" we did 12 months in a 5 bed 'normal' house in Regents' Park in Chch; 6 months in a 4 bedder in Northwood ChCh. The landlords in all three places have asked us "Would you like to buy?" Needless to say, we still rent, and I'd pick 'here' for what suits us at the moment. 

I'm renting an apartment and its absolutely lovely, paying for it though

Good point, Your Landlord. In the UK tenants pay for the council tax and service directly themselves. I see no reason why that could not occur here. Rents would have to fall comensurately, though, as total accommodation outgoings would remian largely stable. ( when you rent in London, say, as a tenant you tend to 'add up' the combined tax/rent cost versus what you want to pay. That affects which Council Tax area of the City you want/can afford to live in). But then also, wouldn't you loose the benefit of claiming those expenses off your tax? I wouldn't know; but you will, being a Landlord and all....

Are you telling us that landlords are too dim to factor in rates and service charges? Jeepers, no wonder they're waiting for the 2nd coming!

Huh? He's paying for them via the rent.....unless you are saying you are not paying the rates?

Or maybe if you have 5 houses you should adk the council to only pay on one as thast all you "use"....

If this is the sum of your financial ability.....well Im gob smacked.....

regards

No bob, private debt used for housing is the problem. Total foreign debt, which is govt. debt plus private debt is what they look at. Our govt. debt is actually not too bad (although getting bad fast), its the private debt thats ringing alarm bells and making our total debt figure really bad. 

Even a vampire can't feed off a corpse that has already been bled dry. A lot of people

can't do more debt......and there goes the consumer led recovery.

I see Hardly Normal are up to offering a 50 months interest free pay nothing now debt hook.

I guess there are still a few suckers being sucked.

Oooooh  yuk ... I've put myself off my lunch now.

"New Zealand's total indebtedness to the world is up there with Portugal, ...Hon David Cunliffe: Given that 90 percent of that total debt is private debt, why is he (aiming at govt. debt), ... There are very high levels of household debt. ..."

So NZ is highly indebted and there is a shortage of housing.

How is it even remotely rational to try to reduce this debt by making houses more expensive?

What is so trerrible about increasing the number of houses? 

"New Zealand's total indebtedness to the world is up there with Portugal, ...Hon David Cunliffe: Given that 90 percent of that total debt is private debt, why is he (aiming at govt. debt), ... There are very high levels of household debt. ..."

They're taking a leaf out of Ronald Reagan's playbook. Using the excuse of government deficit to rationalize the lack of willingness to invest in public services and privatisation of public assets. The Reaganites called it the "strategic deficit".

"President Ronald Reagan's budget director David Stockman coined the phrase "strategic deficit" to describe the usefulness of creating long-term budgetary shortfalls to undercut political support for governmental spending."

As Stockman privately told Sen. Daniel Patrick Moynihan in 1981, accruing large deficits "gives you an argument for cutting back programs that really weren't desired and giving you an argument against establishing new programs you don't really want."

http://prospect.org/cs/articles?article=strategic_deficit_redux

I also noted Bill English's statement of "Recent figures out of Australia show that that economy has to make the same adjustments as the New Zealand economy. There are very high levels of household debt. Australians have decided that they cannot get wealthy by buying houses off each other, and their consumer and housing markets are slowing down quite significantly."

http://parliamenttoday.co.nz/2011/02/questions-and-answers-feb-9/

It appears to be borne out by the softening housing market in Australia, but the caveat is that the Reserve Bank of Australia are managing the real estate market with high interest rates, but according to one of the most authorative real estate market analysts in Australia, they will swiftly cut interest rates in recognition of the importance that housing has for the Australian economy.

"Rismark's Ben Skilbeck added, "The RBA is deliberately seeking to temper activity in the household sector in order to make room for Australia's resources boom. All interest rate and exchange rate sensitive sectors of the economy are feeling the pinch. If commodity prices collapse and the resources story unwinds care of, say, China slowing down, the RBA is likely to reduce interest rates and seek to stimulate demand in the household and consumer sectors."

"The housing market is therefore a powerful hedge against Australia's resources boom running off the rails. A reduction in interest rates will unleash a strong affordability dividend given that house prices have gone nowhere for six months now while household incomes have been rising."

http://www.rpdata.com/press_release /january_a_quiet_month_for_australian_housing_markets.htmlng quickly."

So how does the performance of the RBA compare to that of our own when cast in light of  a record payout by Fonterra for the dairy farmers, which will be comparable to Australia's Resource boom if you account for the difference in population.

"Global dairy giant Fonterra Cooperative Dairies Ltd today posted a profit of $293 million for the half year to January 31, and confirmed its forecast for a record payout to farmers of about $11 billion."

http://www.odt.co.nz/news/business/152929/fonterra-track-record-payout

 

First off you have made an assertion that has zero backing that adding a land tax or CGT will increase house prices.

If a V8 is more expensive to run now days due to higher petrol does this increase or decrease its retail price? Do more people want to get a big loan to pay for one? 

Houses are not a discretionary item (only around .001% of the population choose to not live in houses) therefore it's a supply demand equation.

Problem is many investors chose to buy investment property, as we have already seen with depreciation changes, as it becomes less attractive (more expensive to run), prices lower as there is less demand. 

Don't forget about 30,000 houses which are beyond repair in Christchurch, so as long as 70,000 people leave and go to Australia we will all be fine.

And on that note I spoke with more business owners today, and was astounded by the reduction in business they were seeing.  One who has run a successful professional services firm for 10+ years said his turnover was done 80% from the same time last year which was already at a low level.  This is for a business located in an undamaged building in Addington.  With corporate clients not spending he has decided that he will wind up the business and let the building (which he owns) out, then find a normal job probably outside ChCh and NZ.

Everyone is now thinking seriously about their businesses in ChCh and most small ones are deciding to wind up and move on.  Job losses will be on a scale never seen before in NZ once Govt assisstance expires.

Without risk of hyperbole, grave and dire underestimate the situation.

Unfortunately for John Key, this will all explode pre-election, possibly in as little as 6-8 weeks once top-ups run out.  The window of opportunity for recovery is running out quickly and along with it any chance of economic salvation for NZ.

There never was, and wont be for some time, a recovery, it was the bull trap on the Elliot Wave graph.

Clothing manufacturing-business friend; (work-room St. Asaph and retail was in Merivale,) came through Auckland last week doing a reci. Same thing, Chris. He's wrapping it up in Christchurch after 10+ years, and re-starting in Sydney when whatever compesation comes though. That's 6 people out of longstanding work.

I agree with most of what Chris J has had to say todate and is frustrated however to add some balance,

"Everyone is now thinking seriously about their businesses in ChCh and most small ones are deciding to wind up and move on."

Yes some are however I have been surpised how many have adapted quickly and actually picking up a greater market share than previously. Naturally depends on the sector, business,  location and there is no doubt most businesses have substantial hurdles ahead as their market is going to change.

I have involvement with a professional services firm with 800 clients, it reflects the diversity of the business community, possibly twenty will not continue as this stage, sure more will follow..I just want to make it clear their is resolve to continue business in canterbury with most clients.

We have property investors with properties in the CBD all damaged with uncertain insurance positions that have subsequent purchased new premises since 22 Feb for key tenants, some people have the confidence.

Our business is extremely busy and we are working mega hours for clients, March will be a record month for fees, sure cashflow is going to be a challange for the business community however like other firms with good disaster recovery systems we are up and working and have as much opportunity as risk going forward.

I would hate a business owner to read here one side of the story when there is another possible scenario for many businesses in Canterbury.

speckles, I don't think I'm exaggerating, but admittedly the people I'm talking to are the most affected.  I'm sure a lot of businesses have essentially won the lottery - such as Subway franchisees in Addington; a minority of coffee shops, restaurants and bars in unaffected buildings in unaffected locations; plumbers; engineers; some selected construction businesses etc etc.

Most are doing it tough though.  As a bellweather, go into Placemakers, business seems only about normal or actually less than normal, certainly no mad rush as you might expect.

Just tonight I passed a retail store in a green stickered retail building in Bryndwr, the business owners appeared to be packing up the shop fittings, two large "for lease" signs were in the window obviously a March 31 termination date must have been looming.  Plenty of green stickered retail in the north west lays idle (look at Papanui Rd just north of Frank St).  After a mad rush for larger businesses to find premises the demand seems to have waned.

One of my commercial tenants (a manufacturer and retailer) told me this month he was going to walk out because business was so much worse than anytime in the 12+ years at my property.  The building (just west of the cbd) is undamaged. I gave him a months free rent to think about it, but I'm not sure he has any intention to stay.

The professional services business I mentioned earlier had very diversified clients however all currently see his services as discretionary.  I'm not just talking about him not making a profit, his regular expenses are currently about four times his present turnover.

I would be very interested to know what industry your professional services firm is in? 

It sounds as though you are involved in commercial lettings or something associated which of course there is huge temporary demand for.  But I'm not surprised that you say landlords with key tenants jumped at the opportunity to hang on to them.  I have a friend with a medium scale (30 odd employee) IT business who were located in a prestige CBD building, he was forced to take a 4 year lease on a former real estate office in Hornby - great news for owners of such property!

As primarily a residential landlord we lost about 65% of tenants who simply packed up and left.  Only 2 individual tenants relocated to other less affected properties.  Subsequently we let 2 other properties that had only minor damage to new tenants who had left wrecked properties.  We're running $5,000 down a week which is insured for 12 months.  I think that's pretty indicative of the situation.

 

Chris_J

thank you for the descriptions and opinions about how you see things in Christchurch.

I wish you all the best.

Yes your not in a great place currently. You comments reflect what your dealing with and I do understand. I'm aware of every issues you have mentioned here todate on this forum as I have several clients with similar difficulties. Our main office is also in the red zone. Was just making the point it is one area of several possible new realities people are facing.

Had a client visit today who had lost his total client base and market which was within the four avenues. We assited them to execute a new business plan with an new market niche identified and three weeks in have picked up 17 new clients in the market identified. If you can...adapt.

Our professional services firm is a broad based Business and Financial Consultancy, does not fit into any one traditional industry. Spans Engineering, operations research, psychology through to financial management, finance and legal services.

Back at start of March Trademe had < 900 houses for rent in Chch.

Today that has increased up to 1254 ... including another 58 added today.

I would have expected the opposite by now as I was thinking people who had damaged houses and initially stayed with friends and relatives would be wanting to get out into a more permanent rental by now.

So rather than a rental shortage after the quake it looks like people are leaving faster than houses are getting demolished.   So that seems likely to create excess rental supply and lower rents and house prices.

Just a couple of examples of people who've left are the RE agent who sold my house in Chch last May .... he was a top 10 agent for Harcourts in Chch but has transferred to Nelson.   And my sister in law moved to Queenstown and has a job already.   Much happier.

IMHO if JK and BE want to cut govt borrowing they should cut accommodation suppliments, which would cut govt borrowing + also force rents down and mean people have more disposible income to boost the rest of the economy and pay back private debts.

How much does the NZpublic know about the situation in Christchurch ?

What role does the NZmedia, especially TV play in the case of the national earthquake disaster in Christchurch ?

Not much just bloody reporting !

Why Dr Jonathan Coleman, are broadcasting crime programs such as Cold case, Coro street and Criminal minds more important then people suffering and being frustrated in Christchurch ?  Media TV just doesn’t care in changing their programs, adopting to the current economic affairs. Why Minister of broadcasting, are you not more sensible and introduce programs, which are designed to help New Zealand in this particular case Christchurch ?

Minister, now in difficult times why not connect to the NZpublic ? Why not introducing an one/ two hour(s) program on TVone/ two once a week inviting members of the public concern about an issue of national interest, a few politicians and experts to have a profound debate. This would encourage the public to participate, reconcile among different parties and help to understand each other – it would help to make real progress.

Now in difficult times Minister why are you feeding the NZpublic with DAILY violent crime crap during prime time – in stead -  that’s a bit much I think ?!

Chris – despite you having a lot of frustration/ work right now, I expected a short comment at least to my article above.

Chris - how do you value and classify a direct contact from you guys affected most with the people in charge of the earthquake debating for one/ two hours during prime time on Tvone, two and three in front of the wider NZpublic ?

Thank you Chris for your comment - all helps to improve the situation in Chch -  wonderful !

Sorry Kunst, not to have replied earlier.

Personally I'm not sure if TV debates with "leaders", is of much use.  It's easy for people to promise the world in front of cameras and then deliver nothing.  Broadcasting Key and Parker orating platitudes gets nowhere.

Some decent coverage of the real issues being faced would be much appreciated though.  So the country at least realise what is going on.

Just three of simple things would turn around the situation:

1. Engage with business and property owners in the red zone, on a block by block basis, each with their own official coordinator/go-between/mediator and get all the issues in that particular block ironed out.  Establish what each owner is thinking in regards returning or rebuilding (many will just be interested in cashing out insurance policies) determine what needs to be done to make each building safe and let the owners get in there and sort out with their own people, what needs to be done on their own properties - all before allowing public access.  At the moment Civil Defence are stuffing about for weeks trying to sort things themselves with little imput from owners, then allowing in for 3 hours the day before opening the area to the general public - which is all very bizarre and backward.

Doing the above from the wind up of recovering people, would have been the sensible course of action.  It seems however like with Pike River and Sept 4, that the Govt response is to leave things alone and do nothing until the problem goes away.  (The current situation seems as though the Govt are waiting for another even bigger quake to knock everything down and save them thinking about solutions).

2. Sort out a plan for insurance payouts and impose penalties on slow payers.  Obviously there is a huge degree of unfairness if someone is paid out on day 2 and another person isn't paid out until a year or two later (we still have received nothing on 4 of 5 over $115k Sept 4 claims).  The solution is to have a system of penalties to ensure the claimant receives fair interest (say 5%) on top of on their payouts from the date of the claim.  Sorting the whole EQC process and scraping the stonewalling effect that the Fletchers scheme had would be a start.

3.  Sort out building codes immediately not in 3 or 6 months.  A lot houses started after Sept 4 are now wrecked (eg Kingsbridge Dr).  The amount of bracing in timber framed houses is inadequate, concrete foundations are inadequate, many concrete framed structures are inadequately designed.  After Sept 4 everyone just carried on as normal, something needs to be done this time around.

 

Thanks Chris – obviously you are on the forefront of events like many of your other business partners – like many of other home owners. People’s concern are bureaucracy, delaying practical and speedy procedures, leading into frustration mass redundancies, but also bankruptcies of business and home- owners.

 I’m concerned about too much decision making the wrong/ delayed or no decision making behind closed doors and not enough transparency/ exposure –  cases we often see in local/ central governments.

 I think in front of rolling cameras with a national wide audience people in charge cannot escape hard, precise questions/ demands. Answers by experts/ politicians are public proof if they are kept or not and the contents executed or not.

 I definitely think the entire “Christchurch Earthquake Story” has a better chance to make progress, dealing with media channels TVone, two and three with regular extended debates with people affected, experts and politicians etc. in front of the wider NZpublic.

Walter

So in terms of earthquake consents for new dwellings:

We had two in December, five in January and three in February.

Hooray: EARTHQUAKE RECOVERY HAS REACHED DOUBLE DIGITS!

We now have 10 (yes ten!) consents issued for new house rebuilds (and none have probably being issued since, given that CCC building consents and planning department are only just up and running out of the commandeered Upper Riccarton Library).

Only about 29,990 to go? At 10 every six months, that should take 1499.5 years, excellent!  A job well underway.

Indeed ChrisJ,

I have some questions sitting with Brownlee about this...

Alex - how much does it help when questions aren't ask in front of the wider NZpublic ?

When do we make politicians accountable for their actions/ inactions in this country ?

Read my article above to understand what I mean.

Hi Walter, I understand your anguish at free-to air TV.

I have to say I don't watch free-to-air telly any more because it is so terrible. (Aro st Video has gained from this).

....Brownlee will be on the first show of TVs's 'The Nation' at 10:30 on Saturday though...

TV3’s weekly current affairs show “The Nation”  returns this weekend on Saturday and with a new extended version on Sunday.

The show will feature the first of what will this year be regular in- depth current affairs investigations.

This weekend sees reporter Natasha Smith go to New Orleans to find out what lessons Christchurch can learn from the way that city recovered from Hurricane Katrina.

Earthquake Recovery Minister Gerry Brownlee will be in the studio with Duncan Garner to discuss Natasha’s findings.

And in the Sunday edition an extended panel  including the Director of the University of Auckland Business School Real Estate Research Unit, James Young, Dominion Post columnist Jane Bowron and Press editor, Andrew Holden,   will discuss the future of Christchurch with Sean Plunket.

In following weeks Sean will conduct extended “Hard Talk” type interviews with prominent New Zealanders. These will alternate withthe in-depth tape pieces.

And to lighten the morning up we will be running the first of a series of short satirical topical animated films put together for us by a group of anonymous Wellington media people. This week they take aim at Phil Goff, Darren Hughes and John Key --- all at once!

This year the show is at the new time of 1030 on Saturdays and the extended edition runs at 0800 on Sundays --- on TV3

Alex - Saturday 10:30am – that’s babysitter time.

 In other countries issues of national concerns are broadcasted on major national channels during prime time between 7pm and 10pm.

Nothing is better then confront the people involved (e.x. Chris) asking our politicians/ experts hard questions.

Especially now in hard times, many issues should not be hidden or just scratch on the surface, but openly discussed, during one or even two hours, when the majority of the NZpublic watches TV.

On a related note I spent three hours this morning waiting with an engineer to inspect our properties.  The wait was for a safety team to accompany, which was meant to have been already arranged.  The only reason that it took just three hours was that I contacted a senior Council engineer and got him to sort it out the Civil Defence team (who by the way are UNPAID volunteers - who have just been asked to do another 5 weeks unpaid work. What is going on??)

So 60,000 workers displaced and a handful of volunteers who know nothing about construction or engineering holding up getting anything sorted out?  No offence intended at CD volunteers but don't you think it would be sensible to have a better stategy than that??

There is a total state of inaction, no urgency and total indecision, it is mind bogglingly frustrating.  They all consider anything above head height a risk, and instead of getting on and  letting owners get things sorted they are.. well to be honest.. I don't know what the hell they are doing.  And they don't either.

Staggering incompetance and mismanagement is all I can see.  People who like to find problems and not solutions are at the helm of a sinking ship.

Unfortunately all the people most affected by this are generally middle aged or older and conservative - not wanting to make a fuss and not even sure how to, if they wanted to.  Hence there is little discontent.

I spoke with one accountant (near retirement age) his firm is in the cordon and yellow stickered.  He was still waiting patiently to obtain files, he diligently filled out the forms, he was not that happy that solicitors in neighbouring buildings had been allowed in to access files but accountants had not (apparantly solicitors had been given special clearance to get their files (maybe someone threatened class action???)).  Of course when a friend asked if he wanted to join a protest, the answer was "no, no, not into that sort of thing!" 

Grumpy bureaucrats now rule ChCh.  People who actually keep the city turning are fleeing.

How do you think this will turn out?

Chris do tell why the need for a safety 'team', surely one person would be sufficient? It boggles the mind that you have a bunch of structurally unqualified volunteers escorting a registered engineer.

Hope you read my response to you yesterday.

A team was 2 today.  Last week it was 4.

Unfortunately paranoia rules at present.  Yes safety is needed, but it's all too restricted and nanny state.

The posts here about rents are tragic, like petulant kids digging their toes in and refusing to budge from a preconceived position. 'Yes, rents are going up '', 'No they are not, they are going down' 

Grief!

Agree.  So lets argue about the price of milk instead.  Competition watchdog the Securities Commission is probing the retail milk price.  Retailers has one supplier of milk.  Fonterra the monopolist is paying record payments to farmers.  Oh hello.... is anybody home??  What a waste of tax payers money probing into this.

 

Agree, the whole thing is a waste of time, but it is election year, has that got something to do with it?

reply fail

Question.    Are they building the houses for which there is a demand?

How many people can afford a 5 bed 3 bath with extras on 600sqM.

Perhaps these are all the spec builders can justify on the expensive land available.

So where are the affordable new builds in Auckland?

 

Solution to keep builders going would be to sell the current old state housing stock to private owners and with the cash raised build else where which has got good public transport. The money raised could house a lot more people than what is sold. This keeps builders building and the supply chain involved employed. Also more houses are available on the public market. Good plan?

No...poor plan!

Why?

Social media campaign sends shivers through people trying to sell their houses in a flat property market.

http://www.stuff.co.nz/business/money/4827343/Online-campaign-targets-Australias-housing-woes

Maybe this is why bolly is working on the obr reg...it's not the nz property crash that worries him but a much more serious slump in aus.....would the banks over here survive....would we?

 

I am 69 yrs old. This is my 3rd housing depression cycle & by far the worst. I have built in excess of 500 houses over the past 30+ years, including successfully building many  ''spec" houses. My cost to build adecent quality 4 bed home ranges from $1050.00 per m2 inc. gst. That makes me highly competitive. I will not even consider building "spec" in todays market - thats the path to bankruptcy. My best guess is that the market will stay depressed for the next 3-5 years - provided nothing adverse happens to further damage the market.

Howevr, despite my cautious outlook on the market I am quite optimistic. World population & NZ population is increasing, & as others have commented - they arent making any more land. Therefore I believe section prices will in the long term steadily increase, & good profits will be made in residential house building. Like others I have much more trust in an asset I can see (land,building) rather than eg. shares, which is a form of gambling. I limit my gambling to Lotto. Yes, local authorities are in complete denial about the affect of council charges on land & building costs - but I cant do anything about that, so I dont worry about it. I do worry about the loss of skilled tradesmen to Oz & elsewhere - thats going to cost us.

Even at age 69 I try to think long term. Trying to make big money out of our small, beleagured economy quickly is unreal, & unlikely to happen.

 

 "provided nothing adverse happens to further damage the market."...you mean like rates rising up up and away...or China spitting the dummy...or the property bubble across the ditch imploding quickly instead of the current fizzzzzz...or the middle east mess pushing oil prices to $200...or the govt failing to do enough to satisfy the IMF and NZ being downgraded...or ....hey this is the worst one of the lot....Goofy winning in November!

You are such an optimist.  Look on the bright side, world peace is coming.  ;-)

was quietly stoked that Bunnings is opening just down the way on EPH, along with the other mega stores along lunn avenue.

that surely just upped the surrounding area values, a bit like Sylvia park did other side of Mt Wellington

yippie

 

Those houses at the bottom of the quarry look like slave quarters to me. People just being packed in like sardines with little room inside and outside the house. A biproduct of greed if ever I saw it..

have to agree looks like a drive you mental living in a pit clonesville