Construction comes off its peak

Building consents rebounded in August following a July dip, but economists say the residential construction boom is past its peak.

Seasonally-adjusted new dwelling approvals rose 6.8 per cent to 2176 during the month. That compares with a revised figure of 2038 a pprovals in July, a fall of 6 per cent -- the first in three months.

However, the value of all building consents in August was $1 billion , 2.5 per cent lower than the same period a year ago.

In the year ended August 30, there were 27,087 new dwelling unit consents issued, down 17 per cent on the previous August year.

Building consents have fallen, on a trend basis, for the past eight months.

"Residential construction has well and truly come off its peak," ANZ economists said.

The impact of the downward trend is expected to be most keenly felt in 2006 as fewer consents translate into less building work.

"Approvals are 25 per cent below their peak in late 2003/early 2004 which with a 6-9 month lag will feed through to residential investment, acting as a further drag on GDP growth in 2006," ANZ said.

Non-residential consents are also declining on a trend basis, indicating that the boost to GDP in the second quarter will unwind.

At 2000-plus approvals per month, a degree of resource pressure still exists, however, -- and that will be noted by the Reserve Bank, ANZ said.

"The RB's focus has shifted to inflation, with increasing evidence of pipeline inflation pressures with inflation expectations rising and anecdotes of pricing pressure."

Residential building consents rose 17 per cent in August to $633 million, compared with the previous year, and non-residential building rose 26 per cent to $387m with shops, restaurants and taverns the main contributors.

The rise was widespread, with nine out of 16 regions recording more new dwelling approvals than in August 2004.

The dwelling consents series is notoriously volatile.

Consents hit a nine-month high in March as builders rushed in to beat law changes and higher fees, which came into effect on April 1. Approvals in April fell to their lowest level since January 2002.

- NZPA