Building consent trend at record low

Property

Trend for building consents for new homes hits record low in March since series began in 1982, Stats NZ says

4th May 11, 10:59am by Alex Tarrant

The trend for residential building consents hit its lowest level since the series began in 1982, Statistics New Zealand said today.

Despite the falling trend, the seasonally adjusted number of new dwellings authorised rose 2.2% to 1,027 over the month, following a 9.8% fall in February, Stats NZ said.

“The trend for the number of new dwellings authorised, including apartments, has declined steadily since April 2010, down 28% to the lowest level since the series began in 1981,” Stats NZ said in a media release.

In Canterbury, about 20 earthquake-related building consents for all types of work were identified, with two being for new dwellings. That brings to 14 the number of new dwellings authorised in Canterbury related to the earthquakes which hit the city on September 4 last year and February 22 this year (see below).

'Downward trend to continue'

JP Morgan economist Helen Kevans said she expected the downward trend to continue in the near-term following the earthquake, 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.

"In Canterbury, only 166 new homes were authorized in March, and only 20 of these were identified as earthquake-related. In fact, total permits in Canterbury in March were just over half the number authorized in March of last year, marking the largest fall of any region," she said.

Frustration has been mounting in Christchurch over the length of time EQC and private insurance companies are taking to asses claims, and also over the divergence between the two parties claims. See more in Amanda Morrall's article here.

Minister for Earthquake Recovery Gerry Brownlee last month told interest.co.nz there was no timeframe for when quake-related building consent issuance would pick up, as the ground in Christchurch was still shifting, and land remediation work needed to be carried out.

Meanwhile, despite building permits rising over the month of March, approvals slumped 8.2% over the quarter, signalling a slump in residential investment, Kevans said.

"The quarterly slump in permits is in line with our forecast for a drop of 10%q/q in residential investment in the March quarter, such that our preliminary forecast remains for 1Q GDP to contract 0.2%q/q," she said.

Quake response: From Stats NZ building consent releases:

March: In Canterbury, about 20 earthquake-related consents were identified, with a combined value of $11 million, including two new dwellings.

February: In Canterbury, 16 consents relating to the previous earthquakes were identified, including three new dwellings. The total value of these 16 consents was $2.6 million.

January: In Canterbury, 30 earthquake-related consents were identified in January 2011, including five new dwellings. The total value of these was $4.5 million.

December: In Canterbury, about 30 earthquake-related consents were identified in December 2010, which included two new dwellings. The total value of consents was $10 million.

November: 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.

October: In Canterbury, a small number of low-value consents authorised in October 2010 were related to the earthquake. None of these were for new dwellings.

September: The earthquake on 4 September 2010 has had some impact on building consents issued in Canterbury, due to factors such as territorial authority offices being closed temporarily. The three territorial authorities most affected were Christchurch city, Waimakariri district, and Selwyn district. Combined, the number of consents issued in September was about one-third lower than the monthly average for the previous 12 months. A handful of consents were earthquake-related (none were for new dwellings), with a combined value of approximately $0.5 million.

(Updates with chart, JP Morgan comment, background on quakes.)

Building consents - residential

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Source: Statistics NZ

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30 Comments

by Wolly | 4th May 11, 12:37pm 1304469456

Well it's not going to stop at this level that's for sure....the massive cost increases for every sodding building material and related charge price and fee will explode higher as soon as the Chch rebuilding rorts begin....plus gst on top......so any peasants who thought they might build in the regions are going to get a bloody good boot up the jacksee.

by Alex Tarrant | 4th May 11, 12:53pm 1304470407

Have updated with info on quake effect.

There have been 14 new dwellings authorised in Canterbury due to the earthquakes. So much for the new laws for speeding everything up...

by meh | 4th May 11, 12:56pm 1304470582

Alex, do you have any specific stats for Auckland? I think the area is just as relevant given the "housing shortage" and affordability issue.

by Alex Tarrant | 4th May 11, 1:16pm 1304471761

Hi meh,

Good point. Just updating a few stories at the mo before question time, but aded in a chart with different regions.

Cheers

Alex

by prosperopink | 4th May 11, 1:15pm 1304471737

Wolly, I agree. The costs for building materials is completely unwarranted. Watching some building going on in Richmond. Glue, foam, staples, plastic lego plumbing bits. Pine framing.

Where's the value? So now its increased building costs for inferior materials. Increased council fees for the inspection and consents for inferior buildings (Don't get me started on the aesthetics!!) People can't or won't do it.

by Wolly | 4th May 11, 1:26pm 1304472419

The sector is being murdered by those within grabbing all they can....no sign of a drop in the cost of building...quite the opposite. The rotting homes and quake rebuild will be the final nail in the coffin.

by petrus1942 | 5th May 11, 9:36am 1304544992

Inferior materials?? Pine framing? - used since European settlement in NZ

Glue? better than nails for many purposes. The use of modern materials & methods in building does not mean they are inferior & they are usually more cost effective.

Council fees? Yes, I agree - totally unwarranted.

by Roger Witherspoon | 5th May 11, 11:13am 1304550794

Good question. There has been a lot of degradation in quality going on around us. Its not all bad though, I was rather pleased to see the curtains didn't move in the wind last night. Double glazing is good.

by Nicholas Arrand | 4th May 11, 1:25pm 1304472353

For an economy reliant upon property, this is a disaster for New Zealand property prices. "But there'll be a shortage of new properties to the market that will push prices up" I hear the cry. No there wont! Less consents = less building = less wages paid in a number of related industries = less consumer spending = more job lay-offs = less consumer spending....ad infinitum => more property needed to be sold to live = falling prices ! Only when the mass builders see a profit from their efforts will the market 'stabilise', and that's long time away, if judged by the leads time required to biuld.

by Matt in Auck | 4th May 11, 1:36pm 1304472975

Well put Nicholas. Unfortunately bank economists and property bulls don't understand such systemic circular connections in markets

by Nicholas Arrand | 4th May 11, 1:31pm 1304472694

People who don't have a jobs don't buy anything...not even houses ( that's why the supply isn't needed). They go off to other places to find work, and sell whatever it is they have here, to go.....Those stats. re Kiwi's going to Aussie that came out today? They'll look 'good' in a few months time with Gillards 500,000 jobs that she's going to create!

by Matt in Auck | 4th May 11, 1:33pm 1304472797

exactly, the exodus will only accelerate

the wriitng is on the wall for house prices

by Nicholas Arrand | 4th May 11, 1:39pm 1304473177

New Zealand needs a smaller population. It can't afford the size of the one we have at the moment. If immigration was going to be our salvation, don't you think it would have worked by now, over the last 50 years? All we've done is go backwards in our living standards. Let's use what we have better, between fewer of us, and look to a sustained increase at some future time - if it's appropriate.

by Nicholas Arrand | 4th May 11, 1:42pm 1304473353

Where is the bulk of that 7%, Westminster? In our young; your first home buyers. They're off! Those that stay have no-show of getting established in life as I, and propbably you, did.

by Matt in Auck | 4th May 11, 2:05pm 1304474742

first home buyers market will be dead for years for a number of reasons:

- high youth unemployment

- student loan debt

- fewer opportunities to go work in the UK and come back with lots of pounds

- when you do bring pounds back it is worth a lot less than it did in the early / mid 2000s

- emmigration to Aus

by Andy Rodgers | 4th May 11, 3:38pm 1304480315

Westminter - FYI there are currently 350,000 NZ'ers of working age who are collecting a Gov't benefit. The 7% that are getting unemployment benefit equate to 70,000 of the above figure. That leaves 280,000 working age people who are collecting the following benefits:

DPB

ACC

Sickness benefit

So 7% may be the official Gov't statistic but in total there is a much larger number of working age NZ'ers who are "unofficially" unemployed but on a different benefit. This sad state of affairs was part of the last Labour Gov'ts plan to bring down the unemployment rate by shifting the unemployed on to another form of Gov't benefit. Unfortunately the present national Gov't seem quite happy to continue with this statistical charade. There can be no improvement in NZ's economic performance while such large numbers of NZ'ers are collecting welfare payments.

by Roger Witherspoon | 4th May 11, 1:42pm 1304473325

It means sections and building costs are so high it is not worth building. The point Nic is making is that until buying is cheaper than renting the house price/credit bubble has not corrected.

Maybe we are going to have to have a final blow off in house prices in Auckland where they go up 50% in the next two years on the back of high immigration. Its quite possible.

The point is the current situation is not sustainable and will not be until house prices are significantly lower than their current level. Whether that means a 50% drop or an 80% drop and over what time frame is not clear. They have dropped about 20% in inflation adjusted NZD terms from their peak. They have dropped 50% if priced in gold.

Things are not as they seem.

by Matt in Auck | 4th May 11, 1:31pm 1304472716

this will no doubt prompt the usual garbage from the bank economists about a worsening housing supply etc.

In fact, I think it was Rodney Dickens ( might be wrong) who said there is a strong short term correlaiton to low building consents and low house prices. That is low building activity reflects poor confidence generally in housing

We've seen it in these building consent figures and the Barfoot figures today

by meh | 4th May 11, 1:42pm 1304473338

And this article looks at the under supply issue in parts of the US. Of course it's not relevant to NZ because we're different.

http://macrobusiness.com.au/2011/05/us-housing-what-happened-to-the-underlying-demand/

by Roger Witherspoon | 4th May 11, 1:44pm 1304473473

http://finance.yahoo.com/news/Buying-Beats-Renting-in-80-usnews-1089844…

by Nicholas Arrand | 4th May 11, 1:51pm 1304473892

Spot on, Roger W. It's not an unusual occurrence. The same applied in the UK back in the late 80's to mid 90's. It can take years for it to wash out of the system. Once hurt by a fall in property prices, gun-shyness, takes over! A bit like the share market is still gun-shy here, after all the years that have passed since '87, and will likely apply to finance companies.

by Chris_J | 4th May 11, 2:15pm 1304475329

14, what excellent progress!

So that's a rate of about 21 a year ... and conservatively 20,000 houses need rebuilt ... so that's a thousand-year rebuild. Fantastic news.

Apart from EQC doing an appalling job at identifying how to repair buildings and doing an even worse job at estimating costs, the real problem are the private insurers who didn't get themselves organised after Sept 4 and waited until EQC had finished their assessments until they even began considering claims.

I'm talking about NZI (IAG) in particular.

We have a large number of overcap claims. NZI haven't even assigned assessors to most of them since they haven't been assessed by EQC even though they are clearly over $100k in damage and the EQC rapid assessment confirmed that.

From the Sept 4 quake we had at least 5 overcap, NZI had only sent assessors to 1 prior to Feb 22, they didn't progress on the others because paperwork from EQC had not come in (and by the way, they made virtually no progress on the 1 they assessed either).

Now since they stuffed about we have to wait because they are inudated with 45,000 open claims (apparently). Why are we not compensated for their ineptitude? We should have settlements sorted but NZI, IAG is holding on to their cash and blaming everone else for the holdups (EQC, the assessors, brokers), it's not their fault apparently ... well ... if they had pulled their thumbs out after Sept 4 they could have requested brokers to immediately submit claims that were likely overcap rather than waiting until EQC assessed them.

Just to point out, I am not defaming NZI, every thing above is true.

Several weeks ago I went to one of NZI's "tent" they had set up at a community briefing. The 20 year old employees they had there could tell me nothing, the guy couldn't even find a phone number of anyone to call at NZI. He took my details, they never returned the call.

I called NZI directly, all I have had is serious of slow moving emails, blaming everyone else.

I have asked a number of times to be referred to their complaints department, to no avail, I am beginning to suspect that they don't have one.

Let's just get this clear what I'm talking about, this is not an issue about a broken path or anything trivial. One is in regards a 350ish m2 house that was pretty much wrecked on Sept 4 (tile roof shattered, 9 flues in 3 chimney stacks collapsed, floors sunk and house twisted, all linings shattered - I won't mention how it is post Feb 22), the others are all either sunken or part collapsed after Sept 4, yet assessors still haven't been assigned to them all yet (or if they have the assessors haven't been in contact).

If this was the US I imagine some serious class actions would be pending against these insurers.

At the very least they should be offering interest at the lending rate on funds they have failed to pay out in a reasonable timeframe, and if they are not able to offer full replacement in a reasonable timeframe either they should cover all costs relating to loss of rents and accommodation costs until they are able to provide the full replacement. Alternatively if they are unable to provide full replacement in a reasonable period of time they should offer to settle in cash at the full replacement cost rather than indemnity value.

So far I would rate my experience with NZI as 1 out of 10.

by Andy Rodgers | 4th May 11, 4:09pm 1304482191

ChrisJ - What are your thoughts on still having to pay 70% rates on uninhabitable houses?

by petrus1942 | 5th May 11, 9:49am 1304545766

Whats wrong with the country?

New Zealand 4.4million people $26,966 per capita income

Norway 4.95million people $52,964 per capita

Finland 5.3million $44,488 per capita

Both Finland & Norway have long,bitterly cold winters; but high value manufacturing!

by Vera Fayed | 5th May 11, 11:17am 1304551027

The comparison with Norway is plain stupid. The 20 billion barrels of oil they have exported in the last 40 years and proven reserves of 40 billion barrels, plus natural gas exports second only to Russia are the main reason behind Norway's high GDP. High value manufactured exports aren't that different to NZ. And if Nokia was a kiwi company rather than Finnish we would not be that far behind them either.

by petrus1942 | 10th May 11, 9:25am 1304976336

Somehow I cant believe that oil exports from NZ would ever result in doubling our average income. In NZ, "trickle down" doesnt work like that! The Govt. would get rich; the big corporations would get rich - but that wont help our average income much - some, yes, but not much!

by Vera Fayed | 10th May 11, 9:43am 1304977421

You think perhaps the oil pumps itself out of the ground and magically transform itself into myriad high value products. The Norwegian oil industry provides 80,000 high paying jobs. Those high earners probably result in another 80,000 jobs. Put those in NZ and our economy would have surpluses oozing from every orifice. Notwithstanding the fact that you would still be found moaning that you're not getting your fair share and the big boys are still eating your lunch.

by powerdownkiwi | 10th May 11, 9:50am 1304977854

VF - no. The reason is simple - the Norwegians have/are a mature society. They debate things like 'what is good for us all', rather than 'what's in it for me'.

Socialism? No, more like a community (or a series of) which know that survival is best done via co-operation.

Smart, clear-sighted, long-sighted Government, voted in by a thinking populace.

Compare that to us lot - we're just an ignorant, lightweight, self-centred rabble.

Or should that be: self-scented?

by steven | 10th May 11, 10:44am 1304981091

If you look at the UK v Norway you can see the huge difference in the outcome from becoming a petro-economy...The UK under Maggie Thatcher took the avenue of pumping the oil out as fast as possible to prop up the entire economy with it....Norway took a totally different approach, almost a unique one and its paying off massively.......I have little cofidence our Pollies or our voters are that mature....

The entire point is the big boys dont eat our lunch....the money is spent / invested wisely especially given Peak Oil and the global economic contractions the world faces.....

Also those 80,000 jobs, oil is a poisioned challace for our manufacturiung exporters as our NZD/US goes from 0.8 to 1.2.....they simply cease to exist and the employment goes with them and I bet thats more than 80k jobs........so you need to consider the NET effect on jobs and income and also the oil jobs are temporary....Scotland and Aberdeen benefited because there was no exporting as such from there anyway...but now those jobs face decline.....

Be that as it may, their wont be much oil......so no 80k jobs anyway, hundreds quite possibly.....we'd be wiser to find it and keep it in the ground, our children will need it more than we do.

regards

by Roger Witherspoon | 5th May 11, 11:17am 1304551032

Norway has a bit of oil too, which is nice if you can get it.

It is particularly good for providing free higher education.