Building consents for new houses, excluding apartments, rose 2.6% in September, according to Statistics New Zealand

The flattening trend of new house building activity has continued in September.

Figures from Statistics New Zealand show that in seasonally adjusted terms building consents, excluding the volatile apartment activity, rose 2.6% in September.

If apartments, which vary wildly in numbers from month to month, are included, then the rise was just 1.4%.

Since rising very strongly in the early part of the year building consents figures have been subdued, though still rising - albeit from very low levels of activity.

The modest rise in September was despite the fact that the earthquake rebuild in Canterbury saw that region consent the highest number of new dwellings in 37 years.

Of greater concern will be the Auckland figures. The number of consents, at 489, was the lowest since April and was up just 6.8% on the figure for September 2012. This was the smallest month-on-month increase since April, when the 431 consents figure was some 19.7% higher than the comparative in 2012.

Some months this year the month-on-month growth has been considerable, with a 91.3% gain seen in July compared with the same month in 2012.

Auckland added over 10,000 houses annually in three consecutive years in the early 2000s but since then annual figures have plummeted, averaging well under 4000 a year between 2009 and 2011 before recovering somewhat to 4582 last year.

The Auckland housing market is already looking overheated and the region has a perceived shortage of about 30,000 houses. The Government and the Auckland Council have agreed an Auckland Housing Accord, through which it is aimed to build 39,000 houses in the next three years.

The Reserve Bank's already concerned about rising house prices and the impact that a 'housing bubble' could potentially have on the financial stability of our major banks. The RBNZ's clamped on "speed limits" on banks' high loan to value lending as of October 1. See here for articles on LVRs.

Weak Auckland

Westpac senior economist Michael Gordon said the September consents figures were "surprisingly weak in the under-supplied Auckland market". The Auckland market remained "worryingly subdued".

ASB economist Christina Leung said there were signs that house-building demand was "slowing" in Auckland.

"There have been recent anecdotes from building companies that the restrictions on high-LVR lending, which took effect on the 1st October, are discouraging house-building demand.

"Building companies are reporting concerns amongst some households that if a top-up in mortgage borrowing is needed should unexpected additional building costs be incurred once the building project commenced, then there is the risk of the mortgage hitting the 80% LVR threshold and impacting projects," she said.

Leung said dwelling consent issuance for the year to September totaled just over 5600 in Auckland – well below the 13,000 of new houses the Auckland Council has estimated will be required each year to keep up with population growth over the coming years.

Canterbury record

Statistics New Zealand said a total of 599 new dwellings were consented in Canterbury – the largest number since records began in April 1976.

"Christchurch was the main driver of this month’s increase, with a record number of 309 new houses and apartments consented," industry and labour statistics manager Blair Cardno said.

Across the country, 1860 new dwellings were consented, with Auckland and Canterbury accounting for 58% of the total.

The "trend" for consented new dwellings is at its highest level in more than five years, but the increase has been easing over the past few months.