Builders drop rates as industry struggles

Master Builders members have noticed a big increase in people thinking of building or making alterations. Photo / NZ Herald

The cost of building a new house or renovating has reached rock-bottom, an industry boss says.

Warwick Quinn, chief executive of Registered Master Builders, said yesterday his members had noticed a big rise in inquiries from people thinking of building or making additions and alterations.

They were tempted by particularly good quotes on the work, he said.

Builders who had got $45-$50 an hour two years ago would now work for $30-$50, responding to the sector's downturn and competing harder for the work, he said.

"I don't think there will be a cheaper time to build a new house or renovate in the next 18 months," Quinn said.

Banks were reporting more mortgage inquiries, immigration numbers were up, land prices had dropped, interest rates continued to fall and builders had to compete harder to get work, he said.

He was commenting on new building sector data which showed the sector hitting new lows and consents continuing to decline.

Statistics NZ said fewer new houses and apartments were being built and the value of commercial consents fell 6.4 per cent.

Quinn's organisation represents three-quarters of the construction sector by value, with 1800 companies employing 10,000 to 15,000 people.

He expected commercial building consents to continue declining but said residential builders restructured their businesses last year, cutting overheads and reducing staff.

"The commercial building sector - hotels, motels, offices and retail - is going to soften more because many of the developments take years to build and get through the resource consent process. But residential building has been softening for two years and we think we have hit the bottom. It will go up and down a little but our members are seeing more activity and inquiry levels," he said.

Robin Clements, senior economist at USB New Zealand, said that excluding apartments, the seasonally adjusted number of new dwellings authorised fell 1.3 per cent between February and March.

However the annual figures were much grimmer.

New housing consents excluding apartments were down 37.6 per cent annually, he said.

The fall in March was in contrast to a slight rise in residential dwelling consents in February.

In 14 of New Zealand's 16 regions, fewer new dwelling units were authorised in March this year than in March 2008. Numbers fell by 361 units (34 per cent) in the North Island and by 115 units (23 per cent) in the South Island, Clements said.

The highest regional numbers of new dwellings authorised for March 2009 were in Auckland, with 315 units, down 23 units; then Canterbury, with 209 units, down 36 units; Waikato, with 112 units, down 94 units; and Otago, with 82 units, down 40 units.

The number of applications for commercial building consents was also declining.

The value of non-residential building consents was $332 million in March, down 6.4 per cent compared with March 2008.

Seven out of 11 building types recorded decreases.

Darren Gibbs of Deutsche Bank said the collapse in residential construction had been well-signalled by house-sale falls reported by the Real Estate Institute.

House-sale changes led new housing construction trends by around four months during a typical cycle, he said.

Gibbs is looking out for new house-sale data in the next few months, saying a slight increase in volumes during March boded well for a possible pickup in building activity later this year.

Reduced financing rates, lowered further with the OCR change yesterday, migration changes and the slump in house building indicated a pickup was possible, he said.

"We continue to think that once confidence returns, the recovery in house sales and construction activity is likely to be very steep. In keeping with the past, this recovery is likely to be a significant factor in generating a recovery in the broader economy than could well prove stronger than many are projecting.

"Construction activity in the housing sector has been very weak. We continue to be surprised at the resilience seen in the commercial construction sector. Over coming months we continue to anticipate a more substantial softening in commercial building activity due to the lagged impact of broader weakness in the economy, in keeping with what has been signalled by the various business survey indicators," Gibbs said.

FALLING DOWN

New house consents, year to March 31:

2004: 31,823

2005: 30,255

2006: 25,406

2007: 25,740

2008: 25,740

2009: 16,234