Building consents for houses fall 4.5% to 965 in seasonally adjusted terms in June from May, after three months of rises, Stats NZ says

Building consents issued nationwide for new houses fell 4.5% to 965 in June from May in seasonally adjusted terms after three months of rises, figures released by Statistics New Zealand show.

Despite this, the trend in new homes being consented, excluding apartment units, continued to indicate a gradual rise, although Stats NZ said it was still not possible to confirm whether this was a consistent upward movement.

Including the volatile apartment unit category, building consents for new dwellings fell 1.4% to 1,031 seasonally adjusted in June from May.

“As we saw in the May figures, when apartments are excluded, the longer-term trend shows a small increase in homes authorised recently,” Stats NZ industry and labour statistics manager Louise Holmes-Oliver said in a release.

“However, while the trend has certainly flattened after a year of decline, it is still not possible to confirm if it has started to rise – at least one more month of positive movement would be necessary,” she said.

Unadjusted annual figures for all dwellings showed 995 consents issued in June, down 27.5% from 1,373 in June 2010. Excluding apartments, there were 935 home building consents in June 2011, down 29% from 1,316 the same month a year ago.

In the year ended June, building consents, including apartment units, issued over those 12 months were down 16.3% from the June 2010 year, while excluding apartments, home building consents were down 18.6% from the previous year.

Economist reaction:

Here's ASB economist Jane Turner's take on the figures:

Dwelling consents remained extremely weak in June, with the decline in consent numbers due to lower consent issuance in Canterbury.  Total dwelling consents issued fell 1.4%, led by a 4.5% decline in ex-apartment consents. Looking at the regional break down, consents issued in Canterbury dropped sharply in June, to around half of the level of normal monthly consent issuance (according to ASB’s seasonally adjusted estimates).  This is probably due to the large earthquakes inChristchurch during early June which potentially put repair plans on hold while households waited to assess the damage.   

StatsNZ note earthquake-related consents have started to trickle through. In June, $14 million of earthquake-related consents were issued, including $8 million non-residential consents and $6 million residential consents, including 8 new dwellings.  Nonetheless, the number of consents issued remains extremely low and has yet to pick up in a meaningful sense. We expect residential repair work and construction of replacement housing will begin in early 2012.  Given this, we expect to see a pick-up in consent issuance towards the final months of the year.

Excluding Christchurch, dwelling consent issuance remained stable, albeit at subdued levels.  While overall building demand is currently very low, increasing tightness in the housing supply (particularly in Auckland) will help stimulate an increase in underlying demand for housing construction over the coming year.

Non-residential consents

Consent issuance for non-residential buildings was soft in June, with declines across a broad range of categories including retail outlets and hotels. This result follows some pick-up in issuance in the previous month. Overall, the level of non-residential consent issuance suggests a weak outlook for non-residential construction over the coming year. For the year to June 2011, the value of non-residential consents is down 4.3% on a year ago.

Business confidence surveys points to a rebound in commercial construction intentions in recent months. This rebound likely reflects the substantial amount of post-earthquake rebuilding required. We expect rebuilding activity will pick up pace over 2012, thus underpinning a recovery in construction activity.

Implications

Consent issuance remained very subdued over the first half of 2011, and point to ongoing weakness in construction activity in the coming months.  Over the coming year, we expect repair and replacement of housing in Christchurch to underpin a steady increase in construction activity.  However, this activity is unlikely to start until seismic activity has settled down.  The strong earthquakes in early June highlight the ongoing challenges and uncertainties the region faces, and suggests it will be early 2012 before we start to see a meaningful increase in reconstruction activity.

On top of the Christchurch reconstruction activity, we expect to see a pick up in underlying demand for housing construction throughout the rest of the country. While construction activity remains extremely weak for now, the challenge over the coming years will be the ability of supply to meet demand within the sector.

(Updates with ASB reaction, Stats NZ quote, annual figures)