Building consents up in September as both apartment and residential consents rise (Update 1)

Residential building consents got another welcome boost from retirement village demand in September, with apartment unit consents and normal dwelling consents both rising from August. (Update 1 includes economist comment.) There were 155 apartment consents granted in September, with 93% of these for assisted living apartments associated with retirement villages, Statistics New Zealand said. This was up from 30 apartment consents in August, but down on 366 in September last year, although consent figures for apartments are more volatile than for normal dwelling consents. There were 1,275 consents for normal dwellings in September, the highest unadjusted monthly figure since July last year (when there were 1,322 consents). This was up from 1,165 in August and similar to 1,269 in September 2008. Here are Stats NZ's comments on the figures:

Excluding apartments, the seasonally adjusted number of new dwellings authorised in September 2009 rose 2.8 percent, after rising 3.1 percent in August 2009. Although the level is still low, it is at its highest since August 2008. The trend for the number of new dwellings authorised, excluding apartments, has increased 23 percent since March 2009, following a 54 percent decrease between the recent peak in May 2007 and the low in March 2009. Including apartments, the seasonally adjusted number of new dwellings authorised in September 2009 rose 3.3 percent, after rising 1.8 percent in August 2009. The trend for the number of new dwellings authorised, including apartments, has been increasing since January 2009, although it has eased in recent months. For the September 2009 year, consents were issued for 13,616 new dwellings, including apartments, a 35 percent decrease from the September 2008 year. The value of residential building consents was $480 million in September 2009, 14 percent lower than in September 2008. The trend has been increasing since March 2009 after a series of falls that began in July 2007.

Residential construction is poised to lift off its current low levels. However the lift in housing demand has been relatively muted and the recovery in residential construction is likely to be subdued. The decline in construction activity has created a significant amount of slack in the economy and has been responsible for much of the unwinding in inflation pressures over the past year. With a construction sector that is likely to remain below capacity for sometime, the RBNZ can have some confidence of limited inflation pressure stemming from the construction sector, although the rise in house prices may be more of a concern. The RBNZ reiterated its intention to hold the cash rate at low levels until the second half of 2010, as the sluggish NZ economy requires ongoing policy support. However, with the domestic economic outlook improving we believe the tightness in the housing market will test the RBNZ's patience. We continue to expect the first hike will be in April 2010.