Building consents fall for second month

Friday 26 February 2010

New Zealand home building consents fell for a second month in January, suggesting the nation's economic recovery is still fragile as property owners fret about tax changes and the potential for higher interest rates.

Permits fell 2.8%, seasonally adjusted in January from December, when they fell a revised 3.5%, according to Statistics New Zealand. Approvals rose 0.7% in the latest month, excluding apartments.

Confidence in the housing market eased in the three months through January, according to an ASB survey this week, with a net 37% of respondents deeming it a good time to buy a house, down from 48% three months earlier. The volume of sales fell below 4,000 for just the second month in 20 years, with the other time being January 2009, according to Real Estate Institute data.

"With today's weak consent numbers, as well as a tumble in housing turnover and mixed news on retail spending, it is becoming clear that the economy shut up shop in December and January," said Philip Borkin, economist at Goldman Sachs JBWere. The economy may be taking "a longer break" after what was a difficult year, he said.

Data generally fits with Borkin's view that Reserve Bank Governor Alan Bollard will opt for "a gradual removal of support in June, but potentially later if weak cyclical momentum continues".

Bollard has said he expects to begin raising interest rates for the first time since the economy emerged from recession around the middle of the year.

The value of approvals for home building and renovations rose 15% last month from a year earlier to $380 million. Non-residential consents fell 39% to $223 million.

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