Building consents bounce to 8 month high; worst may be over (Update 1)

The declining trend for residential building consents excluding apartment consents is showing signs that it is easing, Government Statistician Geoff Bascand said on Monday. Apartment consents have been boosted in recent months due to an increase in retirement village building. (Update 1 includes ASB economist Nick Tuffley's comments) There were 1,238 consents for dwelling units authorised in May, the highest monthly figure since September, but down 25% from May 2008, figures released by Statistics New Zealand show. There were 1,009 dwelling consents in April. The 1,238 figure comprised of 275 apartment consents and 963 consents for other residential buildings. The value of all residential building consents in May was NZ$408 million, down 26% from May 2008 and up 15% from April. Seasonally adjusted, there were 1,231 residential consents in May, up 3.5% from April. Excluding apartments, seasonally adjusted residential consents fell 3.1% in May from April. Bascand said that over a third of apartment consents in the first five months of the year had been for 'assisted living apartments' associated with retirement villages. "The trend for the number of authorised new dwellings, excluding apartments, has fallen 54% since the recent peak in June 2007. The decline in the trend is showing signs of easing," Bascand said. The value of consents for non-residential buildings in May was held up at NZ$479 million, its second highest level (the highest being NZ$530 million in April). This was due to consents for sports stadiums around the country, Bascand said. Here is ASB economist Nick Tuffley's take on the figures:

Residential construction activity has been very weak since the end of 2007. The extent to which consents declined by early 2009 also points to further construction declines over Q2. However, the early signs are that the housing market is starting to pick up, which rising net migration will also bolster. Typically there tends to be a 3-6 month lag from sales turnover picking up to dwelling consents lifting, so it could be a few more months until consents lift in earnest from what amounts to very subdued levels (particularly relative to recent house sales turnover). Evidence down the track that house prices have bottomed out will also give more confidence to those at the coalface of development. Non-residential construction has held up better than residential, though we anticipate further weakness in 2009. Nevertheless, the boost over May from planned stadium work highlights that there is still some support to the sector from various infrastructure projects around the country. The consents will do little to change the RBNZ's economic outlook. The RBNZ is anticipating a very strong recovery in residential construction over the March 2011 and 2012 years. Consents have yet to turn up to indicate that will occur, but the turn-up in house sales and migration will continue to give the RBNZ confidence the construction uptick will eventuate.