Apartment consents plummet to new lows

Wednesday, 2 October 2024

New apartment consents have fallen to the lowest level in 10 years, but the bottom of the construction cycle is “fast approaching”, according to one economist.

Stats NZ's latest figures showed 33,362 new homes were consented over the year to August, a decline of 20% on the same period last year.

It was a stark contrast to the record 51,015 consents issued in the year to May 2022.

Within the total, the number of stand-alone home consents were down 9.7% annually to 15,597, while consents for multi-unit homes, which includes townhouses, apartments, retirement village units, and flats, were down 27% to 18,035.

Stats NZ construction and property statistics manager Michael Heslop said the number of multi-unit homes consented in the year ended August was the lowest in the last three years.

But it was consents for apartments that fell the most, with just 1704 consented in the year ending August, a 55% decline on the same period last year.

Infometrics economist Matthew Allman said the annual apartment total was the lowest since early 2014.

Monthly apartment consent numbers also fell below 50 for the first time since April 2016, with no consents coming outside Auckland and Wellington, he said.

Townhouse consents were also down, but they were being pulled down by weakness in Auckland, he said. “Around half of the 23% annual decline comes from the fall in Auckland.

“Weakness in townhouse consent numbers reflects the longer lead times associated with multi-unit developments, reduced investor demand for new builds, high construction costs, and low yields in the real estate market.”

Infometrics expected the Reserve Bank to make two more 25-point cuts to the official cash rate this year, and that would make for a “flurry of interest rate cuts”, Allman said.

“We do not believe this will ignite a rush of residential consents as construction costs are high, but existing house prices are already overinflated compared to both personal incomes (for owner-occupiers) and rental incomes (for investors).”

Westpac senior economist Satish Ranchhod said while consent numbers fell 5% in August, and 20% over the past year, the downturn in consent issuance looked like it was finding a base.

Consent issuance had been volatile recently, but after smoothing through the volatility associated with the Matariki holiday, consents had been averaging 2800 per month since February this year, he said.

“Importantly, interest rates are now dropping and we expect that will support a recovery in the housing market over the year ahead.

“While it will take time for that to pass through to a recovery in construction plans (likely not until mid-2025), it’s looking likely that the bottom of the residential construction cycle is fast approaching.”

On a regional basis, the Stats NZ figures showed there was a decline in consents annually everywhere except Otago, where the number was up 1.8%.

The highest number of consents were issued in Auckland at 13,748, down 24% annually, and Canterbury at 6713, down 9.4%.

But Canterbury construction expert Mike Blackburn said his analysis of data collected every month from the Christchurch, Selwyn and Waimakariri councils showed the tide was turning for the region.

He collates the data to get a rolling 12 month average, and the August average was up 3%, which was the first time it was up in 17 months, he said.

“On a national basis, the construction industry downturn is still going on, but in Canterbury, and especially Christchurch, the industry is starting to recover.

“It is being driven by underlying demand for new housing due to strong population growth, including internal migration. Looking ahead, I think Canterbury will lead the industry’s recovery.”