Owing largely to work on the Canterbury earthquake recovery, conditions in the New Zealand building and construction industry are finally starting to pick up.
At $NZ 2.5 billion (seasonally adjusted), the overall value of all building work put in place throughout the country was up 3.6 per cent in the December quarter – the first such rise following five straight quarters of decline since the June quarter of 2010.
The good news looks set to continue. On a ‘trend’ basis, which strips out not just seasonal effects but also short-term, one-off movements, the value of all buildings approved has risen every month since March last year – albeit with the increase slowing in January thanks to a drop in non-residential consents.
Still, with the value of work sitting at 9.5 per cent less than that which was done in 2010 ($2.762 billion) in seasonally adjusted terms, current activity levels remain low by recent historic standards (see chart).
The comeback in overall building in the December quarter was driven by a 5.1 per cent rise in residential work, which bounced back from 18-year lows. Going forward, the seasonally adjusted number of new dwelling units authorised for construction in January (1,326 apartments) rose by 8.3 per cent when compared with December and by more than one quarter when compared with January last year. Those figures would seem to indicate the overall pace at which new residential building work is coming in is picking up – a promising sign for the near term future of the sector.
These overall figures, however, are heavily skewed by the effect of the Canterbury rebuild. Indeed, outside of Canterbury (see chart below), the volume of new work coming in remains subdued across most regions, with particular areas of weakness concentrated around Auckland, Wellington, Hawke’s Bay and Southland.
Outside of housing, activity on non-residential buildings grew during the three months to December following three consecutive quarters of decline, with the seasonally adjusted value of work done rising by 1.8 per cent in the quarter.
That said, at $NZ 1.125 billion, the value of work done in the sector is still down 12.8 per cent over the same period one year earlier in 2010 ($NZ 1.290 billion), meaning that while activity may be back on the rise, it remains low compared with recent historical levels.
Moving forward, the sector is obviously set to benefit from work associated with Christchurch rebuilding efforts, as well as the civil construction sector through repairs and upgrades to vital infrastructure.
Outside of that, however, consent data is not encouraging: after having risen for seven straight months, the trend value of consents issued for non-residential building fell by one per cent in January. Furthermore, at $979 million, the unadjusted value of non-residential consents issued over the three months to January is down on the $NZ 1.039 billion and $NZ 1.016 billion worth of consents issued in January 2010 and 2009 respectively, meaning that new work is coming in slowly by recent historic standards.
As shown in the above chart, retail and ‘social’ building were the best performers in terms of consents issued during January, while building conditions in factories and storage remains extremely weak.