Housing consents hit 18-month high

Permission for 2545 new homes was granted last month, a figure that will not please the Reserve Bank, which indicated it wanted a rebalancing of demand away from domestic spending towards exports. Picture / BoP Times

Residential building consents hit an 18-month high in September, continuing an upward trend and suggesting there may be renewed heat in the housing market.

Consents for 2545 new housing units were issued over the month, the highest number since March last year when there was a spike ahead of new building regulations. Adjusted for seasonal variations, 2472 residential consents were issued, a 6.1 per cent increase on the previous month, coming after a 4.9 per cent rise in August and a 15.9 per cent leap in July.

"From the point of view of the Reserve Bank's concern about a resilient housing market, this data can only aggravate these concerns," said UBS economist Robin Clements.

While it had been accentuated last month by a sharp increase in apartment consents (which tend to be volatile), the rising trend was broad based, said Deutsche Bank chief economist Darren Gibbs. Today's National Bank Business Outlook survey also showed a continuation of the strengthening in residential construction intentions seen in recent months.

ANZ economists said yesterday's data would not be welcomed by the Reserve Bank which last week indicated it was still looking for a rebalancing of demand away from domestic spending towards exports.

Consent issuance was accelerating at a time when the Reserve Bank would like to see a substantial drop from present levels.

The latest round of mortgage lending competition among banks would also boost housing demand and sales which were already showing early signs of picking up, ANZ said.

Mr Gibbs said the consents figures and the improvement in home sales in recent months suggested the low point in the housing construction cycle had already passed, with activity being supported by a solid influx of migrant workers and an increase in consumer confidence, which was at a 13-month high.

However, Goldman Sachs JBWere economist Shamubeel Eaqub said that an excess of new housing, high interest rates and rising construction costs should see house building fall until the middle of next year before gradually increasing.

Meanwhile, September non residential building consents were valued at $343 million, down from $362 million in August.

Commercial, retail and industrial building consents were strong while public sector consents lost some momentum.

But the overall figure was consistent, with non-residential activity remaining firm, which would provide an offset to the residential sector downturn next year, said Eaqub.

Rising demand

* September building consents (month on month):

* Residential* +6.1 %

* Excluding apartments* +1.1%

* Value of non residential consents: $343 million

(seasonally adjusted)