KEY POINTS:
The $12 billion building sector has hit a major downturn but three economists say the industry might only be at the start of its decline.
Shamubeel Eaqub, investment research director at Goldman Sachs JBWere, said he expected further weakness this year, although the depth and duration of the cycle hinged on interest rates.
He was commenting on building consent data out from Statistics NZ which showed the number of new building permits, including consents for apartments, fell 42.3 per cent in May compared with April.
"We are only at the beginning of the downturn in construction activity and we expect further weakness over the coming year," Eaqub said.
Robin Clements, senior economist at UBS NZ, is also forecasting rougher times.
"We think it is safe to say residential building activity will continue to be a drag on economic growth through this year," Clements said.
Developers were having problems getting finance so consents for apartments might be issued but the building work had either not started or was not completed due to money woes, he said.
Jane Turner, ASB economist, said further declines in consents were highly likely. She predicted that a new low could be reached later this year, basing her predictions partly on the low volumes of house sales.
Statistics NZ said there were 1653 new housing units authorised in May, a decrease of 669 units compared with May last year. There were 105 apartment units authorised, down five units compared with May last year.
Excluding apartments, there were 1548 new houses authorised in May, down 664 units. The trend has been declining since June 2007.
Of the 16 regions monitored, 13 regions showed declines in the number of new houses and apartments given consent. The biggest decreases in residential consents were in Auckland, Waikato and Canterbury.
Residential building consents issued in May were worth $553 million, down $181 million from May last year.
Non-residential consents were worth $356 million, down $36 million from May last year.
The value of consents for all buildings was $909 million in May, a decrease of $217 million or 19 per cent from a high value of $1.1 billion last May.
Residential buildings contributed 61 per cent and non-residential buildings contributed 39 per cent.
For the year to May, the total value of consents issued for all buildings was $11.9 billion, up $242 million or 2.1 per cent from the year to May.
