Pressure on property

Demand is growing in the property market but new building is struggling to keep up, new data reveals.

Friday, November 28th 2014, 12:00AM

by The Landlord

Westpac chief economist Dominick Stephens said mortgage application numbers were rising sharply to levels that were well ahead of last year and even surpassed 2012 levels.

He pointed to booming migration, which he said was causing New Zealand’s population to increase at an unprecedented rate.

It comes as building consent figures show an increase in new dwellings approved, but a decrease in the underlying trend.

There were 2152 new dwellings consented in October, including 179 apartments.

Canterbury had 686, Auckland 591 and Waikato 194.

The seasonally-adjusted number was up 8.8% in the month, after dropping 12% in September.

Statistics NZ business indicators manager Neil Kelly said: “The trend for new dwellings was recently at its highest level in seven years. While it’s now decreasing, the trend is still 6% higher than at the same time last year.”

Stephens’ colleague Michael Gordon said trend in consents has flattened out noticeably over the course of this year.

“Since the election, we've seen a strong rebound in mortgage approvals, property listings, house sales, and now building consents. That said, the underlying trend in building consents has not been as impressive as we were expecting. Growth has slowed since the start of the year, and October consents (excluding apartments) were still 4% below the peak reached in June. It may be that the post-election recovery has not yet fully played out, but in the meantime we have to regard the slowing growth in consents as a threat to our forecasts of a substantial lift in nationwide building activity next year."

Gordon said the lack of momentum in Auckland was noticeable.

“Given the obvious incentives to build in the region - relatively fast house price growth, relatively strong population growth, a greater legacy of under-building in previous years, and efforts to reduce red tape - the recent weakness in building consents is of some concern."

Stephens said the pressure on the housing market in an environment of low inflation would be problematic for the Reserve Bank.

He suggested loan-to-value restrictions would have to remain in place for some time and the Reserve Bank might have to look at other restrictions on lending in the year ahead.

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