Consents spike not enough

The number of new dwelling consents issued reached a 13-year-high in August 2017, according to Statistics New Zealand’s latest data.

Nationwide, 3,166 new homes were consented in August, which was up by 12% on August 2106 and, once seasonally adjusted, was up by 10% on July.

It was a spike in consents for apartments and retirement village units in supply-strapped Auckland, which saw 1,184 consents issued, that drove the increase.

Statistics New Zealand construction statistics manager Melissa McKenzie said Auckland’s building consent statistics are quite volatile because of the high proportion of apartments.

“Looking at the longer-term picture, Auckland has consented an average of more than 850 new homes a month over the past year.”

About 10,265 new homes were consented in the Auckland region in the August 2017 year, as compared to the record high of 12,937 new dwellings in June 2004.

However, it is estimated that Auckland has a shortage of around 35,000 homes and needs to have 11,000 to 12,000 built each year for supply to keep pace with demand.

ASB senior economist Jane Turner said the data shows there was a rise in consents in August, but it was led by a strong lift in volatile items such as apartments and retirement units.

“While this month’s building consents are encouraging, we remain unsure if trend growth in residential building demand will lift much further from current levels.”

Not only has consent issuance flat-lined in recent months, but construction is running short of what is needed to meet current population growth, let alone alleviate dwelling shortages, in Auckland and Wellington, she said.

“While we would typically expect to see further growth in building demand in response, a number of factors might be crimping demand growth.

“These include high construction costs, construction sector capacity constraints, rising mortgage rates, tightening lending standards, election uncertainty and the weaker housing market.”

Westpac senior economist Michael Gordon said there may have been a record number of consents in August, but it followed a shockingly low number in July and was driven entirely by consents for multiple dwellings.

The result was much stronger than they had expected for the month, but it doesn’t contradict their broader view of the homebuilding industry, he said.

“On a three-month average basis, it still appears that the pace of building in Auckland has flatlined over the last year, at a level well short of what’s needed to match population growth.”

Dwelling consents in Canterbury were down slightly, after a pickup in July, Gordon added.

“We expect post-earthquake reconstruction to continue its gradual wind-down.”

Read more:

Apartment under supply looming 

Shortfall to get worse before it gets better