Building consents remain high after bouncing back from lockdown slump

Tuesday, 1 September 2020

The high number of new homes consented was partly due to an increase in the number of townhouses, flats, and units.

More than 10,000 new homes were given the green light in the last three months but economists remain wary about the outlook for residential construction.

Data from Stats NZ shows 3391 new home consents were issued in July, the third month in a row of relatively high numbers after a slump in April during the Covid-19 alert level 4 lockdown.

Stats NZ acting construction indicators manager Dave Adair sad the three-month rolling total was the highest since the 1970s.

“The high number of new homes consented was partly due to an increase in the number of townhouses, flats, and units.

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“There may also be an element of catch-up after non-essential businesses closed in April.”

Data shows 3391 new home consents were issued in July, the third month in a row of relatively high numbers after a slump in April.

A total of 6805 consents were issued for additions and alterations on stand-alone houses over the last three months, after a drop in April.

This was the second-highest three-month total since records began in April 1990. The average in the last five years was 5403.

Adair said the increase in consents for additions and alterations for stand-alone houses coincided with Covid-19 border closures, indicating some money earmarked for overseas holidays had instead gone into renovations.

The high number of consents was a positive sign for the residential construction industry but it would take time to see if consents were carried through to construction, he said.

ASB senior economist Mark Smith said it was difficult to say where the construction sector might end up, given potential changes in demand, the impact of record low mortgage interest rates and a backlog of building work.

”Over the next few months, we expect construction sector work to remain reasonably elevated. Beyond that, however, construction sector demand is expected to cool,” he said.

“There may be potentially more enduring impacts on construction activity if New Zealand’s borders stay shut or the shift in work patterns observed during Covid-19 become more entrenched.”

Infometrics economist Brad Olsen said house building efforts were still set to decline as economic conditions remained softer and the effects of the Covid-19 pandemic limited credit availability.

However, both medium density building nationally, and residential construction in Auckland, would provide some support in the near-term.

“With the housing market holding up better than expected, and interest rates set to fall further, upside risks remain to our building forecasts, but the general uncertainty of the economic outlook makes the path forward for construction hard to decipher.”

The value of non-residential building consents for the year ended July 2020 fell $6.7 billion, or more than 11 per cent, on the previous year.

Adair said the fall in the value of consents for hotels, motels and other short-term accommodation buildings over the last four months was likely to be a reflection of uncertainty in the tourism sector while the border remained closed.