Apartment consents at lowest level in eight years

Consents for new apartments are in free fall, and new data shows that in March they hit the lowest annual total in eight years, Infometrics says.

There were 35,236 new homes consented nationwide over the year to March, a fall of 25% on the year to March 2023, according to the latest Stats NZ figures.

Within that there were 15,166 consents for stand-alone houses issued, and 20,070 multiunit homes, which includes townhouses, apartments, retirement village units and flats, were consented.

Standalone house consents were down 23%, while multi-unit homes consents were down 26% compared with the year ended March 2023.

The multi-unit home consents included 16,166 townhouses, flats, and units, 2188 apartments, and 1716 retirement village units.

Infometrics principal economist Brad Olsen said the number of apartments consented nationwide was down 48%, so by nearly half, from the same time last year, and it was the lowest annual total since May 2016.

It was shocking, but not unexpected given the economic climate and the greater volatility involved with large, multi-unit developments, he said.

Apartments were only built in significant amounts in Auckland, Wellington and Canterbury, and the bulk of them were in Auckland, but the regional trends were worth noting, Olsen said.

Consents for apartments fell the most in Wellington where 214 were issued in the year to March, a fall of 70% from 725 over the year to March 2023. In Auckland, the number was down 58% to 1246 from 2087.

In contrast, consents for apartments in Canterbury increased 120% to 251, but that was from a low base and could involve just one or two buildings, he said.

“It highlights that there are some opportunities in this space out there, but they are few and far between because it is so hard to get over that lending hurdle.”

More broadly, the annual decline in consents overall had stopped accelerating and started to stabilise in the past few months, he said.

Westpac senior economist Satish Ranchhod said looking at the longer-term trend, it was clear the building sector had moved into a tougher period, with consents down 25% over the past year.

But it looked like consent issuance was finding a floor, with consents for standalone houses holding at around current levels for more than six months now, he said.

“The more volatile multi-unit space has been dropping back over the past year, and we could see some further weakness over the coming year, but that downtrend is showing signs of flattening off.”

He expected building activity would continue to drop back over the rest of this year, consistent with the drop in consents over the past year.

To date, the fall in building activity had been more gradual than the fall in consents, reflecting that building firms struggled to keep up with the number of new projects that were consented in recent years, he said.

“But the trend is still clearly down, and we expect residential building activity will fall 16% from its recent peak, making the current downturn in building activity the sharpest since the 2008/09 financial crisis.”

A turn in that trend was not likely until interest rates fell and the housing market recovered, he said. “But with inflation still elevated, the scope for rate cuts this year is looking limited.”