Building consents falling fast as construction sector cools

New residential construction or building rates are still strong but falling. Photo / Jason Oxenham

There were 42,110 new homes consented in New Zealand in the year ended August 2023, down 17 per cent compared with the year ended August 2022, according to figures released by Stats NZ today.

“This figure continues the downward trend from the peak of 51,015 in the year ended May 2022,” construction and property statistics manager Anna Howe said.

“However, the number of new homes consented in the year ended August 2023 is still at a higher level than any 12-month period prior to 2021.”

On a monthly basis the number (3170) is now down at similar levels to August 2020.

“The downturn in consent issuance follows the sharp rise in interest rates and building costs over the past year, along with the related falls in house prices,” said Westpac senior economist Satish Ranchhod.

“Those conditions have seen many prospective buyers stepping back from the market, and also meant that developers have been cautious about bringing new projects to market. Given those conditions, the risk for consent issuance over the next few months remains to the downside.”

The ongoing downturn in consent issuance reinforced Westpac’s expectations for a “stark fall” in building activity over the coming year, he said.

“We’re forecasting that residential construction activity will fall by about 16 per cent from its recent peaks. That drop in building activity is not quite as large as the fall in consent numbers as shortages of labour and material have delayed many projects over the past couple of years. As a result, there are still a number of projects in the pipeline (though some of those may be cancelled).”

In the year ended August 2023, there were 17,267 stand-alone houses consented, down 25 per cent compared with the year ended August 2022. There were 24,843 multi-unit homes consented, down 10 per cent over the same period.

Of the multi-unit homes consented in the year ended August 2023, there were:

• 18,158 townhouses, flats, and units (down 12 per cent, compared with the year ended August 2022)
• 3801 apartments (down 7.2 per cent)
• 2884 retirement village units (up 2.4 per cent).

All regions except Marlborough consented fewer new homes compared with the year ended August 2022. The four regions with the highest number of new homes consented in the year ended August 2023 were:

• Auckland with 18,003 (down 16 per cent, compared with the year ended August 2022)
• Canterbury with 7406 (down 15 per cent)
• Waikato with 3981 (down 22 per cent)
• Wellington with 3267 (down 16 per cent).

On a monthly basis there were, 3170 new homes consented in the month of August 2023, down 30 per cent compared with August 2022.

“Fewer new homes were consented in each month of 2023 so far, compared with the same month of both 2022 and 2021,” Howe said.

“It is now almost a year since the number of new homes consented in a month exceeded the number consented in the same month of the previous year. The last time this occurred was in September 2022.”

Looking ahead, conditions in the housing market were changing fast, Westpac’s Ranchhod said.

“While we do expect a sharp fall in residential construction levels, some recent developments will help to provide a floor under home building activity. Notably, net migration has risen to a record high pushing population growth over 2 per cent. In addition, the fall in house prices and sales seen over the past year has been arrested.”

On the non-residential front, $9.9 billion of work was consented over the past year.

“The amount of work coming to market is flattening off as financing costs have risen. Industrial property continues to be the star, with activity in the office and retail spaces more modest,” Ranchhod said.