KEY POINTS:
BIS Shrapnel is forecasting a decline in building activity in the next two years before an upturn before the 2011 Rugby World Cup.
The company's six-monthly report on the New Zealand building and construction sector forecasts that total building consents will fall 3 per cent in 2006-2007 and a further 2 per cent in 2007-2008.
"This decline in total building activity will be brought about by a 6 per cent softening in the non-residential building sector during 2007-2008. Residential building will remain close to steady," said senior project manager, Adeline Wong.
A moderate 4 per cent rebound in overall building and construction activity is forecast for 2008-2009 as projects associated with the 2011 world cup get underway and the residential building sector shows a slight improvement .
"Non-residential activity will rise 10 per cent in 2008-2009 as projects related to the World Cup ramp up, buoying a sector that would otherwise be flat," said Wong.
Still, the residential building sector will continue to be held back by high construction costs and challenging home affordability.
"These restraints will be particularly evident in regional pockets within the North Island and Canterbury regions where property price growth remains solid at present."
BIS Shrapnel also expects there to be an increase in public spending on health, education and other institutional buildings in the lead-up to the general election next year, contributing to a shortage of skilled labour in the building sector.
The residential building sector is more sensitive to higher construction costs, as they are passed on to home buyers. Higher costs combined with higher home mortgage rates and increases in median house prices will continue to affect home affordability.
BIS Shrapnel forecasts some easing in floating interest rates during 2007-2008, though it expects real mortgage rates to rise marginally in the next two years as home owners come off fixed rates.
Weak economic growth over the period and interest rates that are, in effect, high are expected to erode consumer confidence and restrain a residential building sector rebound.
The annual value of commercial and industrial building authorisations is expected to weaken in the next three years from a 15-year high last year.
- NZPA
