Building consents on a rise

The total number of residential dwelling consents rose strongly in May – by 5.5% to 2,265, after a 0.5% increase in April.

Thursday, June 28th 2007, 6:16PM

by The Landlord

Excluding apartments, consents rose 2.8% in the month, although the level of consent issuance, at 2,015, is the highest since July 2004.

Council fee increases that come into force from July are likely to have contributed to the rise in consent issuance in May, say ANZ Bank economic commentators, as builders rush to put in applications prior to this.

“Capacity pressures remain and there are signs that construction costs continue to increase – and point to housing related inflation persisting,” ANZ says in its Economic Review release today.

Statistics NZ warned that the seasonal pattern is currently not well identified and thus some caution is needed in interpreting these figures.

The Waikato and Otago regions recorded the largest increases in residential consent issuance, while Auckland (largely due to apartments) recorded the largest decrease.

The trend is now showing signs of rising, says ANZ. On an annual basis, the number of consents is broadly in line with a year ago.

“Looking forward, easing migration trends and house sales suggest a modest cooling in consent activity in the second half of 2007,” the bank predicts.

Darren Gibbs, chief economist for Deutsche Bank, agrees, saying “The recent slowdown in house sales (which anecdotes suggest has gathered pace in June), together with the sharp decline in residential construction intentions in the May NBNZ survey point to a slowdown in activity in the September quarter”.

Construction prices are up 0.9% in May over April and 11.3% higher compared to a year ago – pointing to housing related inflation persisting for some time. Together with a trend increase in average house size, Gibbs says this means that the value of residential consents issued rose 16% year-on-year over this period (including consents issued for alterations and additions).

Gibbs says, “Even allowing for strong growth in construction costs, the total value of all consents issued implies a rise in real construction activity over the period. Going forward, the Reserve Bank will be looking for signs of moderation in residential construction in particular”.

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