Home-building approvals climb, adding weight to recovery

The number of consents issued surged 11.7% to 1,397 in October, seasonally adjusted, from the previous month, according to Statistics New Zealand. Excluding apartments, permits climbed 11.2% to 1,295, the highest since June 2008.

The consents data adds to signs of a revival in the housing sector, with home sales surging 36% last month from October 2008, according to Real Estate Institute figures this month.

Reserve Bank Governor Alan Bollard has vowed to keep the Official Cash Rate (OCR) near its current record low 2.5% until the second half of 2010 and even though traders expect him to move sooner, he lags behind his Australian counterpart in raising borrowing costs.

"We continue to see residential construction as an important prop for growth over 2010," said Bernard Doyle, New Zealand strategist at Goldman Sachs JBWere. "Low interest rates, house sales activity, positive net migration and construction sector business sentiment all point to further upside from here."

Inbound migrants exceeded departures by 18,560 in the 12 months through October, a five-year high, according to government figures. Demand from migrants was a key factor fuelling New Zealand's housing boom before the financial crisis brought it crashing down.

The value of home-building approvals rose 9.5% last month from a year earlier to $481 million, according to today's report.Non-residential building approvals fell 5.6% to $329 million.