New Zealand’s residential building consents fall for second straight month in August

The total number of residential building consents in New Zealand dropped for the second straight month in August. The consent issuance fell 1 percent in the month; however, the level is still quite above the level seen in the first half of 2016. Hence it is still viewed as a positive outcome, noted ANZ in a research note. Issuance had surged 20 percent sequentially in June and has retraced just around half of that fall in the subsequent two months. Total issuance, in three months annualized terms, is at around 33,000, the strongest since mid-2004, stated ANZ.

In composition terms,  consents for ‘houses’ rose 4.4 percent in sequential terms, whereas multi-dwelling consents dropped 12 percent sequentially in the month. In Auckland, the trend for new dwellings rose after a recent tailing off. Meanwhile, issuance in South Island (ex-Canterbury) and in Wellington is rising quite strongly on a trend basis.

Moreover, the value of non-residential issuance is also trending upwards. Non-residential consents are still valued at more than NZD 500 million in August, even if it declined from the results in June and July. According to Statistics New Zealand, the underlying trend is currently at a pace of 1.3 percent month-on-month.

The capacity restraints and associated costs rises might limit the sector’s capability to expand at a stronger pace from here, according to ANZ. However, one proxy of cost inflation from the data has been slightly more restrained recently. It rose just 5.6 percent year-on-year in August, down from its recent high.

“Low interest rates, house price gains, net migration, a clear push from policy makers, solid business confidence and infrastructure demands should ensure the construction sector continues to be a key contributor to overall GDP growth for a while yet”, added ANZ.