The volume of New Zealand building work put in place fell to a decade-low in the June quarter as construction of new housing sank.
Total building activity dropped 6.6% in the three months ended June 30, following a 6.3% decline in the first quarter of the year, according to Statistics New Zealand.
That’s the lowest level since September 2001, before the housing boom really hit its stride in the past decade, and was led by a 12% slump in residential property. Non-residential construction activity fell 1.4%. The value of home construction sank 11% to NZ$1.28 billion in the period, with new dwellings dropping below NZ$1 billion for the first since June 2002.
“A decline of this extent is surprising,” said Jane Turner, economist at ASB.
“Construction activity was already very weak, and we had expected construction activity to remain broadly stable given building consents had started to stabilise over the first half of 2011.”
Still, recent government data showed the number of new building consents issued has been rising in the three of the four months through July, suggesting developers are preparing to ramp up their work. The Canterbury earthquakes are likely to soak up a lot of the demand after causing an estimated $15 billion of damage to the country’s biggest city.
The value of non-residential building work fell 0.8% to NZ$1.15 billion in the June quarter, led by a 4.7% decline in new commercial building to NZ$310 million. Construction of new factories and industrial buildings climbed almost 50% to NZ$76 million in the quarter.
Turner said the result was much weaker than expected and knocked 0.3 percentage points off ASB's preliminary GDP forecast.
"We are now currently expecting 0.5% GDP growth over Q2, although we will finalise this number after the release of the Economic Survey of Manufacturing next week (13th of September)."
(Updated with more details from ASB)