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Auckland construction key to economic growth

Ramping up work to rectify Auckland’s supply shortage could be crucial for New Zealand’s continued economic growth, according to economists.

Wednesday, August 12th 2015, 11:01AM

by Miriam Bell

Rising construction activity means that New Zealand’s GDP growth should be solid this year - despite the woes of the dairy industry, a new report from HSBC states.

HSBC chief economist Paul Bloxham said construction activity has been a key source of growth for the economy in recent years.

Not only was construction activity 45% higher in the first quarter of 2015 than it was in the first quarter of 2011, but it has contributed an average of 0.5bps to GDP growth every year since 2011.

In contrast, dairy exports contributed 0.3bps to GDP over the same period.

Canterbury’s post-earthquake rebuild has been the main driver of construction activity, but data shows that rebuild activity appears to have peaked.

However, HSBC believes that strong population growth and rapidly rising housing prices, should support a further upswing in Auckland housing construction.

Bloxham said that, while construction in Auckland has been lifting slowly, it still lags population growth and has not been reducing the estimated 20,000 dwelling shortfall.

“A significant lift in construction would help correct Auckland's supply-demand imbalance, reduce the risk of further housing price overvaluation and help to offset the eventual drag on growth from falling rebuild activity in Canterbury.”

The scale of home-building necessary to meet Auckland's needs over coming years is likely to be even larger than the residential rebuild in Canterbury, Bloxham continued.

“We expect this to be a key support for growth over the next couple of years.”

In their latest economic overview, Westpac economists argue that the economic tide has turned for New Zealand.

One of the few economic bright spots they see is Auckland’s pressing need for new housing and infrastructure to accommodate the city’s rapidly growing population.

Westpac chief economist Dominick Stephens said they do expect some moderation in population growth over the coming year, but it is unlikely to turn decisively until Australia becomes a more compelling alternative destination.

He said the issue was how quickly Auckland construction could and would ramp up to meet demand.

“Issuance of residential building consents has doubled in recent years, but given the recent downturn in confidence it would be optimistic to expect a sudden further leg higher,” Stephens said.

“However, with development rules slowly being relaxed and interest rates falling, we do expect building activity in the region to continue rising over time.”

« New Aussie tax rules affect Kiwi investorsFree Investment Property Showcase Events: Auckland, Wellington and Christchurch »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

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