Residential building activity drops

Property

Residential building activity falls 2.1% in March qtr from Dec, third consecutive fall, Stats NZ says

8th Jun 11, 11:23am by Alex Tarrant

Residential building activity fell 2.1% during the March quarter from the December quarter, while non-residential activity was down 10.4% over the quarter, seasonally adjusted figures from Statistics New Zealand show.

The fall in residential activity was the third consecutive quarterly fall, and comes at a time when economists and policy makers are pointing to housing shortages appearing in the biggest cities as a factor putting upward pressure on house prices, particularly in Auckland.

Overall building activity fell 6.3% in the March 2011 quarter, after adjusting for seasonal effects, Statistics New Zealand said.

“We don’t normally comment on regional information for the value of building work because this survey is not designed to produce accurate regional estimates. However, the information we have suggests that in Canterbury, building activity decreased significantly, at least in part due to the 22 February earthquake,"Business statistics manager Louise Holmes-Oliver said.

“While the fall in Canterbury is undoubtedly a key part of the story, it is not all of it. If we exclude it from the national results, we still see decreases in both residential and non-residential building activity,” Holmes-Oliver said.

"The overall fall in the volume of building work was driven by non-residential building activity. This fell 10.4% in the March 2011 quarter, reversing the 9.2% rise in the December 2010 quarter. The latest decline in non-residential building work is the first since the December 2009 quarter," she said.

"The volume of residential building work also fell, but by a lesser 2.1% in the March 2011 quarter. This was the third consecutive fall, having dropped 12.4% over the previous two quarters."

Stats NZ said in the March 2011 year compared with the March 2010 year, the unadjusted value of:

all building work was NZ$11,023 million, up 4.5%
residential building work was NZ$6,188 million, up 5.9%
non-residential building work was NZ$4,834 million, up 2.7%

Data on building activity is obtained each quarter primarily by a postal survey of around 3,500 builders, owners, and other building consent applicants.

Housing shortage?

ASB economist Christina Leung said the data showed underlying building demand remained extremely weak.

"Against the backdrop of population growth, the low level of residential building activity heightens the risk the NZ housing market becomes undersupplied," Leung said.

"The 10.4% decline in non-residential construction in Q1 was in line with our forecasts. Over the past year, public sector projects have offset the weakness in private non-residential building activity. However, more recent consent issuance data suggest public sector work has also begun to ebb. Recent business confidence surveys have shown an improvement in commercial construction intentions, and we expect this will flow through to a recovery in non-residential construction over the coming year as businesses become more confident about investing. Added to that will be the boost from post-earthquake rebuilding activity expected over 2012," she said.

"While construction activity currently remains at weak levels, we expect the outlook over 2012 to be more promising. In particular, rebuilding activity in Christchurch should provide a boost to the construction sector. Nonetheless, with ongoing uncertainty in Christchurch and weak consent issuance in other regions there remains little urgency for the RBNZ to lift the OCR. We expect the RBNZ will leave interest rates at current low levels until March 2012, once it has seen evidence the NZ recovery has gained a firmer footing."

See our interactive building work completed chart here and below.

(Updated with ASB economist comment and interactive chart)

Building work completed

Select chart tabs

Source: Statistics NZ

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8 Comments

by Wolly | 8th Jun 11, 12:46pm 1307494006

"Against the backdrop of population growth, the low level of residential building activity heightens the risk the NZ housing market becomes undersupplied," Leung said

Right ok...but who can afford the bloated costs of building...at a time when even the Govt mouthpiece is telling us he is borrowing heaps more than he has to because the shite is about to hit the fan and the cost of debt will shoot higher.....stands to reason the peasants can see the same wall of effluent heading their way..they have stopped borrowing mousemoney from the parasitic banks...Humpty Bloody Dumpty falls off the cliff....splat.

Bollard can play silly games as long as he wants but the same peasants read into his cheaper for longer, 'fear and worry'.....Bollard is making it worse!!!!

And knowing the thieving govt is stealing 15% on the house build cost...ie about $45ooo in gst...amounts to one stinking big incentive NOT TO BUILD.

by Matt in Auck | 8th Jun 11, 12:50pm 1307494238

wolly don't you know Leung is a robot who just repeats the same meassage every month

by Bobby | 8th Jun 11, 1:10pm 1307495445

Talking to the builder that built my Hebel home 4 years ago the other day. He was not happy about the lack of work but what was really pissing him off is because of lack of work his son who is a top young builder has taken up a job in Australia and is leaving early July. Not good for the future of New Zealand when our good young tradesmen are leaving. I agree Wolly, the costs of building in NZ went through the roof over the last 10 years. Every one got too greedy and now look at it. Stuffed! PS. Was over in Mt Maunganui last Sunday. saw 3 white plastic fully enclosed leaky homes on Marine Parade. What a circus!

by steven | 8th Jun 11, 9:34pm 1307525661

"the costs of building in NZ went through the roof over the last 10 years."

Yep....I did a big extension about then and at the end of it vowed never to do it again....the materials costs had got insane....what really p*sses me off is I know full well the retail prices are just way OTT and the costs to builders etc are significantly lower....so I wont play the game any more. I do maintainance and repairs and leave it at that.

regards

by muzza | 8th Jun 11, 5:33pm 1307511213

Bobby, it's worse than that, there was a lot of school building development at the time when W. Peters was Govt Treasurer, and there are leaky school buildings galore - one at Papamoa is virtually being gutted and redone, drive into Gate Pa and see extensive repairs being done at the Gate Pa school, every State secondary school that got new buildings then have leaky issues etc etc . Take not only the lack of new house being built but those with issues, the market will probably get tight in growth areas like Tauranga. -basically house prices now are at 2009 CV - see Monday's NZ Herald Propert report of price data for 400 suburbs across the North Island.

by Bernard Hickey | 8th Jun 11, 8:36pm 1307522189

FYI from an emailer:

Good afternoon Bernard

One of the comments the other day on your site regarding new house construction utilized the numbers per 1000 current homes.

The comment was New Zealand new house construction is at 2.7 homes per 1000 of current stock.

After reviewing the numbers, it seems we are not building enough homes to keep up with the rate of decay. 100 year old villas and 60 year old bungalows are dropping off the fit for purpose scale at a greater rate than we are replacing them.

Therefore the total amount of actual homes fit for purpose over the last year in New Zealand has declined?

Many individuals have commented to me recently that they have accumulated their deposits over the past 2/3 years and with interest rates historically low have made an attempt to enter the housing market, only to be declined mortgages as most banks calculate at around the 7% mark for security etc.

So the general comment is “if I can not afford a house with today’s current financial conditions, I will never be able to afford a home.” Some banks have indicated that they are correct.

I have been pushing for a home owners grant derived from the GST generated through the catalyst of New building. Eg $380k house and land package , generates $49,565 in GST. If a partial rebate was given of say 20k and the residual 29k would still be returned to the IRD.

If a cap was put on the sale price being 380k then developers would feel incentivised to construct affordable housing to enable the purchasers to take advantage of scheme.

Simply put here Bernard, the writing is on the wall that if the NZ Government do not implement a suitable scheme and New Zealanders cannot afford an Affordable Home then all new housing will be Social Housing. Housing is a necessity to survival from the elements at its very core.

When you follow this train of thought, the options are, allow say 20k to assist with the deposit from the GST and have developers provide and build large quantities of Affordable Housing to fit the price cap to be eligible.(so no real cash outlay from the Govt)

Or build a $250k house on Govt land that New Zealanders will live in for life.

Recently I travelled over to Australia and spoke with New Zealanders who have emigrated there and after 18 months were eligible for the First Home Owners grant, they now live in a brand new home in Coloundra and the two builders were Kiwi’s that built it. Although I cannot confirm, my meetings with large construction companies, indicated there are now over 2000 NZ builders in NSW and QLD.

With out a doubt New Zealand is heading toward a housing crisis which will have an impact on our economy and our way of life as a Nation. Over 10,000 on the waiting list at Housing NZ and recently the Salvation army believe this to be a drop in the ocean as many haven’t registered for housing as they now know over 10,000 are before them.

Children are sleeping on damp mattresses in garages, people are triple bunking, the poor health outcomes are going to be crippling in years to come, one person with a respitory disorder can cost hundreds of thousands of dollars in treatment over a lifetime.

Over the past year I have read your articles, most well balanced and informative, some to kick up reaction. I am a mature investor with a strict criteria, and although my core business is construction you have highlighted many other very worthwhile investments, you are correct that NZ has a love affair with property but I see no main stream education on other investments.

When have you seen the NZX take out a commercial on main stream TV or explain the terms utilized in the stock exchange or even how to utilize its service?

I am passionate that with a little common sense, applied logic and practical knowledge we can avert a crippling housing shortage.

We don’t believe in a hand out but a hand up, if a guy gets up every day and goes to work he deserves the ability to own his own home at the very least a strong chance to.

Other wise New Zealanders are off to countries where they can afford a home.

Regards

Ryan

by Bernard Hickey | 8th Jun 11, 8:37pm 1307522240

Ryan

Many thanks.

I'm not a fan of subsidies for home buyers.

I think land prices need to fall a long way.

cheers

Bernard

by steven | 8th Jun 11, 9:28pm 1307525323

"Other wise New Zealanders are off to countries where they can afford a home"

Such as? OZ even more over-priced

UK? not much better...

What they all have in common is a bubble caused by cheap credit....simple really its in the prcess of bursting and 50% drops mean they can stay and get a house....if they still think sinking their hard earned $ into a falling asset makes sense.

"I am passionate that with a little common sense, applied logic and practical knowledge we can avert a crippling housing shortage."

Common sense? logic? yeah right....usually when I see this I know it isnt except in the one person's mind.

Alternatively I could take note of someone who's been studying the OZ market and how it operates,

http://www.debtdeflation.com/blogs/2011/06/08/my-property-debate-presen…

It operates on cheap credit and Govn boosts to keep it alive....its not sustainable....

There will be no crippling housing shortage....What there is far more likely to be is a crippling debt hangover from those guys who get up and work every day and see huge negative equity and are in effect ruined. Far more likely at that point they leave....there is nothing to stay for.

regards