KEY POINTS:
New house building consents have fallen to their lowest level in six years as the heat goes out of the residential construction sector.
Council authorisations were given to build 25,544 new houses last year, the lowest number since 2002 and nearly 6000 houses down on the peak of 2004.
Work slowed considerably last month as high interest rates took their toll, a pattern which emerged earlier in 2007.
Statistics New Zealand's data, out yesterday, showed 1738 new housing units were authorised in December, down 145 units on December 2006. The value of new housing work also fell from $564 million in December 2006 to $539 million last month.
Daniel Wills, ASB economist, said interest rates were partly responsible.
"This data reinforces recent real estate data suggesting moderation in the housing market over the second half of 2007 as Reserve Bank tightening between March and July begins to bite and net immigration has softened," he said.
The Reserve Bank raised the official cash rate four times last year to a record 8.25 per cent.
Robin Clements, senior economist at UBS, agreed with Wills.
"The dwelling consents data is further proof - if it was needed - that this key factor in the inflation process in rapidly cooling. Activity - consents and sales - are well down and the house price data from Quotable Value and the Real Estate Institute shows that material progress is being made on this front also," he said.
Statistics NZ said there was little change in the value of non-residential building consents, which totalled $331 million in December, but the South Island was feeling the pinch hardest.
"The decrease in new housing units occurred mostly in the South Island, with 125 fewer units authorised compared with December 2006. There were 21 fewer in the North Island. Half of New Zealand's 16 regions authorised fewer units with the largest decrease in Canterbury where 113 fewer units were authorised. The largest increase was 29 units in Taranaki."
The number of new houses approved annually has fallen from a peak in the year to December 2004 when 31,423 dwellings were consented. But the total floor area is still increasing, a trend attributed to rising house sizes and large garages being incorporated into resource consent applications. Although new house numbers are dropping, the value of residential building work is continuing to rise, going from $4.3 billion in 2002 to $6.4 billion last year.
The combined value of residential and non-residential consents rose from $7.9 billion in 2002 to $12.3 billion last year. Pieter Burghout, chief executive of the Master Builders Federation, said the latest set of data was expected. The number of new houses gaining consent was falling but the dollar value was still rising, he said.
The construction sector as a business was worth more than $12 billion annually to the economy, he said.
"We are expecting more of the same for this year, with a slightly softening residential market of perhaps to 24,500 consents, a steady if not slightly stronger commercial market and a very strong infrastructure market.
"We are forecasting a pick-up again, particularly in the residential market, in 2009 once we get the election out of the way." Reserve Bank efforts to dampen things were working but Burghout predicted they might backfire.
Constraining housing supply would have a detrimental impact on affordability because if there are fewer houses on the market, they cost more.
