First housing sector growth since 2007, says new report

Research out today says the housing sector should grow strongly this year. Photo / Northern Advocate

New housing consents are leading an upward surge in the residential housing sector, which recorded its first growth since June 2007, says a leading industry analyst and economic forecaster.

BIS Shrapnel's Building and Construction in New Zealand 2009/10 - 2015 report indicated a 27 per cent increase in detached housing consents in the December quarter of last year.

Despite continued fluctuation in apartment building consents, BIS Shrapnel expects the rebound to continue over the coming years, driven by a shortfall in the supply to new houses versus the demand.

Adeline Wong, senior project manager for BIS Shrapnel, said consumer confidence was expected to pick up as economic growth strengthened.

"Despite forecast increases in mortgage rates over the next two to three years, although the official cash rate is forecast to remain well below its peak in 2007 and 2008, we expect home buyers' confidence to be boosted by wages and employment growth," she said.

BIS Shrapnel said high net migration levels over the next three years would also boost the housing market.

Wong said a shortage of houses would support median house price growth over the next 18 to 24 months, with dwelling completions not meeting the demand for housing, driving prices up.

"We estimate dwelling completions to fall to between 17,300 and 18,600 units per annum over the next two years," she said. "This in no way meets our estimated underlying demand for housing, which will average 29,000 units per annum over the same period."

The North Island, led by Auckland, was expected to lead the rebound in residential building activity.

"We believe the housing stock deficiency in the Auckland region will continue to build up, due to its protracted downturn over the past seven years which has seen building consents languishing at near record low levels," said Wong.

Realestate.co.nz CEO Alistair Helm said growth in the residential building sector was probably driving underlying median price increases in real estate.

"That's the oddity of the statistics over the last couple of months, that median prices have been going up, but the underlying stratified price, which allows for the variables of sectors moving or changing, has not been growing," he said.

"Therefore the only assumption you can make is that a sector is growing fast and that sector would be the higher priced sector."

The BIS Shrapnel research also said the non-residential sector had stood up reasonably well to tough economic conditions, boosted by office, education and stadium building activity.

However, non-residential building consents were expected to soften over the next two years, as office and stadium construction dropped off.

Solid infrastructure construction would be underscored over the next five years by NZ$5.8 billion worth of infrastructure spending by the Government to increase economic activity.

Major motorway construction projects such as Auckland's $1.4 billion Waterview link, as well as Christchurch's NZ$730 million Southern Motorway upgrade, would be major components of the Government's solid infrastructure spending.