KEY POINTS:
The number of permits issued for new dwellings, including apartments, fell 42.3 per cent in the month of May compared with April.
The decline was 25.3 per cent if apartments are excluded.
Statistics New Zealand said a seasonally adjusted 1645 new dwellings were approved for the month, down from a record 2853 in April.
The April figures should be treated with caution because there was a sharp increase in apartment consents in the month and the Easter holiday fell differently this year compared to last year.
"The trend in the number of new dwellings excluding apartments has been declining since June 2007 following a period of general increases from August 2005," Statistics New Zealand said.
In the year ended May 31, new dwelling consents, including apartments, fell 5.8 per cent from the previous May year.
The total value of consents issued for the month for all residential buildings, including alterations and additions, was $553 million, down $181 million from May 2007.
The value of consents issued for non-residential buildings was $356 million, down 9 per cent from the same month a year ago.
The value of consents for all buildings in the year through May was $909 billion, down 19 per cent from the previous year.
Robin Clemens, senior economist at UBS New Zealand, said there was a chance that apartment consents might be issued, but the actual building work may be delayed or not happen at all because of the difficulties developers are having financing such projects (often involving finance companies).
"&we think it is safe to say that residential building activity will continue to be a drag on economic growth through this year," said Clemens.
Real residential investment fell 5.5 per cent in the first quarter of this year and took off 0.4 per cent from total GDP.
"Further detractions look sure to follow and we expect falling residential construction activity to contribute to another fall in Q2 real GDP," he said.
This would mean New Zealand was in a recession for the first half of the year.
Clemens said he expected the Reserve Bank to start easing back on interest rates in September (held back only by rising headline inflation due to oil/food prices) but recognised that the deteriorating growth outlook brings into play the possibility of an earlier start (24 July) or a more aggressive (50 basis points or hald of one per cent) start in September.
- NZPA/ HERALD ONLINE
