Building consent data confirms new-housing sector softening

Building consents rose last month but economists say the data confirms the overall softening in housing construction is continuing.

Statistics New Zealand said 2237 new housing dwellings were authorised last month, up on the 2173 approved in January. In seasonally adjusted terms, building consents rose 12.4 per cent.

Non-residential construction - which had been expected to at least partially offset weakness in home building - was also weak.

The value of non-residential consents fell $26 million, from $316 million in February last year to $290 million last month. This was the sixth consecutive monthly decline in non-residential consents.

Statistics NZ said apartment consent figures helped boost the latest numbers because 523 new apartments were approved last month.

"The trend for the number of new dwelling units, excluding apartment units, has been relatively flat in recent months, following a decline from the high levels of 2003 and 2004," it said.

Tim Bowring, an economist with Macquarie Bank, said annual approvals remained in the red, down 14 per cent between in the 12 months to February 2005 and the 12 months ended last month.

"It does appear that residential housing excluding apartments has plateaued around current levels. We continue to remain pessimistic on residential building approvals and residential construction in the face of consecutive interest rate hikes in late 2005," Bowring said.

"We remain wary of the potential for non-residential to join the downturn in residential approvals in the face of plunging business confidence."

Darren Gibbs, chief economist for Deutsche Bank, said the residential consent data was a "volatile saw-tooth pattern" and its erratic nature was highlighted in the last month with a surprise in the number of apartment consents.

"Core housing consents tend to follow developments in the existing home market," Gibbs said.

UBS economist Robin Clements warned against drawing any conclusions from the latest figures, saying the volatility of consent data made it difficult "and dangerous" to be too adamant about a pattern. But the core underlying trend looked to be flat, consistent with low inward migration, poor affordability, a soft economic environment and deteriorating job security. Further downside could not be ruled out.

"However, the apartment side of the consents appears to be remaining strong, although we would have our doubts about how sustainable this will prove," Clements said.

"The non-residential picture is probably reflecting low business confidence and firms putting construction plans on hold, although Government spending in this area will likely remain solid."

Master Builders chief executive Pieter Burghout said the figures confirmed a softening residential construction market but a commercial market which was holding steady.

Declines were evident in cheaper new houses, such as low-cost and speculative or development housing. But quality work was still ample.

"The good builders will still find they have a year's worth of work ahead of them. People wanting additions and alterations or new house starts will find it easier to get a builder.

"It's been a good bullish run for four years and most builders would welcome any softening because they have been ... running their businesses at full throttle."

But the market would recover in two years' time and builders would be ready.


The numbers

* Approvals for new dwellings, February: 2237 worth $561 million.
* Approvals for new dwellings, January: 2173 worth $546 million.
* Economists found the figures flat, saying they confirmed a softening.
* This key indicator is predicted to continue to decline.