At first glance, a 7.2 per cent drop in the seasonally adjusted number of consents granted for residential unit construction throughout New Zealand in April would not appear to bode well for the country’s housing construction sector.
Even stripping out the volatile apartments sector, a 5.8 per cent drop (seasonally adjusted) in consent numbers for stand-alone houses would not look encouraging at face value.
That changes when you put the figures in perspective. When compared with April, 2011, the number of all residential consents is up 33 per cent and that for stand-alone houses is up 22 per cent. Indeed, April’s seasonally adjusted number of consents for all residential units was at its third highest level since July 2010; and that number excluding apartments is at its second highest level during that time.
Moreover, on a ‘trend’ basis, which adjusts not only for seasonal factors but also for short term, one-off movements, housing approvals have been rising since May last year.
Bottom line: March’s figure was abnormally high and comparisons with this are misleading. The pace at which new residential construction work is coming in is picking up.
Housing is on the mend.
Not that this could be called a boom – at 1,230, the unadjusted number of housing and multi-residential consents in April is only just over half of the 2,000 plus levels seen before the GFC really took hold – but the market has definitely come off its bottom. A recovery of modest proportions is well underway.
Why is this So?
Two primary factors lie behind the improvement.
First and most obvious is the Canterbury rebuild. Of the 449 dwellings approved for construction in April, seventeen (or 3.79 per cent) are identified as being earthquake-related. Furthermore, in terms of regions, just over a quarter of the total increase in dwellings during April over the same month year came from Canterbury.
A bigger story, however, is the chronic undersupply of housing in Auckland, which continues to experience net gains in migration even at a time when the available stock of housing has been affected by low levels of building following the GFC.
Going forward, as the Canterbury rebuild keeps going forward and the Department of Building and Housing warns that even the current higher numbers of new consents in Auckland be insufficient to meet demand, the current recovery is likely to continue. Not surprisingly then, the Department says it expects the volume of new residential work coming into the pipeline to increase further over the next six months.
Not So in Non-Residential
Such is not the case with regard to non-residential building, where the pace at which new residential work is coming in has slowed.
Indeed, the data shows that on a trend basis, the dollar value of non-residential buildings approved for construction fell by 3.7 per cent in April – the sixth straight monthly fall – and is down by 13.7 per cent when compared with October last year.
While this sector is starting to gain some benefit from the Canterbury rebuild, activity is being impacted by weak economic conditions, lower levels of public sector building and a drop back in activity following the completion of Rugby World Cup projects last year.