New home consent figures continue on downward slide
The number of new home consents dropped to pre-Covid levels in February, and the outlook for building activity remains weak, one economist says.
Stats NZ’s latest figures show there were 36,276 new homes consented nationwide over the year to February, a fall of 25% from the year ended February 2023.
At the peak of the recent building boom, a record high of 51,015 consents were issued in the year to May 2022, but the figure had been declining ever since.
In February, there were 2795 new homes consented, and that was 6% less than in February last year.
Stats NZ construction and property statistics manager Michael Heslop said fewer new homes were consented in February than in each of the previous five February months.
“But, the number of new homes consented was still higher than any February month between 1975 and 2018.”
On an annual basis, the number of consents being issued for standalone homes and for multi-unit homes, which includes townhouses, apartments, retirement village units and flats, were both declining.
Heslop said they fell by a similar proportion in the year ended February, and that contrasted to the same period last year when consents for multi-unit homes increased while stand-alone houses decreased.
Westpac senior economist Satish Ranchhod said once the figures were seasonally adjusted there was a 15% bounce in consents in February, but it was not a sign the construction sector was heating up. February’s bounce was centred on the volatile medium-density components and followed a particularly weak January result, he said.
“Today’s result takes us back to trend, and that trend is firmly down.”
The annual consent number gave a clearer picture of what was happening, and it had dropped 25% over the past year, with sharp falls in most regions including Auckland (down 27%), Wellington (down 40%) and Canterbury (down 20%), he said.
Tougher financial conditions, including high interest rates, sharp rises in building costs over recent years and a softer real estate market, were to blame as they made many projects uneconomic.
But while consent issuance had been dropping for over a year now, the downturn in homebuilding activity had been more modest, he said.
“That’s because earlier shortages of staff and materials meant building activity was not able to keep up with the large number of projects consented in recent years, with project times stretching out.
“It also means there is still a large number of projects yet to be completed and consequently the downturn in construction activity has been gradual to date.”
Despite that, fewer new projects were now coming to market and many in the construction industry were reporting weak forward orders, Ranchhod said.
“As a result, we expect a sizeable downturn in building activity over the year ahead,” Ranchhod said.
“And that fall in activity is occurring at the same time as population growth is booming, adding to the risk of housing shortages across the country.”