A surprising fall in building activity during the past month may lead to further pressure going on the Reserve Bank to modify its recently applied bank lending limits.
And Labour Party leader David Cunliffe has climbed into the figures, saying the drop in the number of new building consents "has blown a hole" in the Government’s housing policy.
Approvals to build new houses - excluding apartments - fell by 2.3% in October, according to Statistics New Zealand.
Including apartments, which can vary in number a lot from month to month, approvals were down 0.6%.
The fall in the latest month coincides with the introduction by the RBNZ of "speed limits" on banks' high loan to value lending as of October 1. See here for articles on LVRs.
And the drop in consent numbers in October comes despite a strong rise in activity in Canterbury due to the earthquake rebuilding programme.
But after strong gains seen in the rate of activity nationally earlier in the year, with April for example seeing a seasonally-adjusted rise of 8% in non-apartment house approvals, recent months have seen a marked easing.
Today's figures may add further fuel to the fire over the question of whether new Reserve Bank lending limits are having an impact on building activity.
The RBNZ introduced the lending curbs in reaction to strongly rising house prices, particularly in Auckland. The central bank mainly brought the measure in to protect financial stability, but also with an eye to dampening activity.
Figures released by the RBNZ this week showed that banks' high LVR lending had more than halved in the past month.
The latest BNZ-REINZ Residential Market Survey showed that first home buyers had virtually deserted the housing market in the past month.
The building industry has been lobbying strongly for exemptions to the LVR limits to be placed on new home construction.
The Registered Master Builders Federation (RMBF) said this week that the outcome of a survey of building companies and new build home owners confirms its initial thoughts that low deposit buyers form around 15% -20% of all new residential construction.
ASB economist Christina Leung said while it was encouraging to see the rebuild "back on track" in Canterbury, the continued slowing in house-building demand in Auckland "is starting to cause some concern".
"The number of consents issued in Auckland over the past year is well below the levels required to keep up with the estimated population growth. As a result, we expect the housing shortage to persist over the coming years and keep house prices relatively elevated in the region."
Stats NZ said that in October building consents were issued nationally for 1758 non-apartment dwellings.
Additionally there were approvals for 133 apartments, including 35 retirement village units, making a total of 1891 new dwellings.
The figures would have looked much worse without the boost from the rebuilding in Canterbury. There were 572 approvals for new houses issued in the region, up from just 333 for the same month a year ago.
The Auckland 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.
Builders have been calling for exemptions from the limits on new homes. These figures will likely increase those calls.
In Auckland there were 476 consents for new houses issued in October, which compares with 433 in the same month a year ago.
Cunliffe said the latest figures were confirmation of the building industry's warnings on the impact of LVRs.
"John Key indicated late last month that the Government was tracking consents week by week and said numbers were actually increasing in Auckland. He was wrong," Cunliffe said.
"We have already seen first home buyers locked out of the Kiwi dream. Now we are seeing the Government and the Reserve Bank pulling in opposite directions.
"The Reserve Bank can’t be blamed for being concerned about financial stability. It has been pushed into a corner by National’s failure to get a grip on the housing crisis.
"Increasing the supply of affordable homes is vital.
"John Key and his Government didn’t think through the implications of LVRs. Now they should take responsibility for the collateral damage: First home buyers and a drop in building consent numbers."
Building consents - residential
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4 Comments
I don't think that this should be a surprise drop...............
If you're living in Christchurch........it is no surprise at all..........since the Government took the building consents off the Council things are slower than ever.........apparently the staff will work through the Xmas period to catch up on some processing.
LVR's were always going to have an impact on new builds........
Cunnie is such an opportunistic fellow its amazing .
The October drop is more likely to be due to some other factor than Govt housing policy .
The LTVR rules also probalby have nothing to do with it , as they were only inrodcued on 1 Oct , and new builds would have been in the pipline for months beforehand .
The thing I find amazing is that RBNZ un- intentionally targets First home buyers through the LTVR where families are buying a home, a secured tangible asset at 5% interest .
The desire for Home ownership is a rational desire for security , and implies social and family stability.
Yet we do nothing about rampant unsecured lending by both major banks and loan sharks to the financially illiterate and vulnerable families who cannot afford to be borrowing at 29% + administration fees + Insurance fees, +++
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