Taste for new houses back on the rise

New Zealanders' appetite for new houses appears to be returning, according to figures out yesterday.

Statistics New Zealand said the number of new dwellings authorised, including apartments, for the year to June rose 14 per cent from a year earlier to 16,167 units.

The seasonally adjusted number of new dwellings authorised last month was up 3.5 per cent on May.

The bigger-scale commercial building market is running out of steam with non-residential consents down 25.8 per cent annually and the value of that market sliding from $4.7 billion last year to $3.7 billion.

The value of all residential building work - new houses, apartments, additions and alterations - was $5.7 billion in the June year, up on the 2009 June year's $5.1 billion but below the boom times of 2007 when the sector put up $7.7 billion of work.

The building sector has come off its peak in 2007 when buildings worth $11.7 billion rose. Now the sector is worth just $9.5 billion and building bosses are worried about keeping staff, particularly next year.

Infrastructure and commercial builders say next year's order books are particularly slow and this is affecting analysts' projections of Fletcher Building's income in some divisions.

Shamubeel Eaqub, NZIER principal economist, said the data still showed a lacklustre picture.

"About 16,000 homes were consented in the past year, up only 2 per cent from the previous 12 months to June, 2009," he said. "This compares against the 10-year median or norm of 26,000 new houses. Building consents trends are consistent with an anaemic economy."

The sector was subdued because of lack of demand. Households were cautious and repaying debt rather than borrowing to build.

"More households are choosing to live in larger units, for example youngsters delaying flatting given very high youth unemployment. This has dampened demand for housing despite strong population growth in recent years. As a result there is no housing shortage."

Mortgage interest rates were not cheap but might not get much dearer.

"As the economy recovers and there is greater clarity on the outlook for mortgage rates and employment prospects we will see the housing market slowly recover. We expect this to happen in the second half of 2011," he said.

The non-residential figures were far more worrying, he said.

Warwick Quinn of Master Builders estimated franchise home builders could be taking up to half the residential market and said consumers liked their products.

"It's like retailing, with show homes, thousands of plans to pick from and 3D images," he said. "It's a more tactile experience and people like that."

The residential market was still relatively depressed, he said, but he was more concerned about the non-residential sector because particularly worrying signs were emerging.

Jane Turner of ASB said the sector was showing a slow return to slightly better fortunes. Consent applications tended to lead construction activity by around three months.

"Recent trends in consent issuance point to a relatively subdued recovery in residential construction activity," she said. "Demand for housing remains very weak, despite low shorter-term interest rates. In particular, the recent sharp slowdown in net migration and resulting slower population growth will weigh on the outlook for new construction demand."

More applications were made to build shops and restaurants after May's decline, she said. But applications for office buildings remained weak, indicating continued softness in private non-residential construction in the near term.