The current headwinds facing the building industry do not appear to be denting the optimism of property developers, with $2.62 billion of new building work consented in July, up 4.1% compared to July last year and up 27.5% compared to July 2020, according to Statistics NZ.
That took the total value of new building work consented to $31.571 billion for the 12 months to July this year, up 16.9% compared to the previous 12 months.
That included 4100 new homes consented in July plus another $213 million of residential alterations, which took the total value of residential building work consented in July to $1.928 billion, up 6.9% compared to July last year.
In the 12 months to July $22.585 billion of residential building work was consented, up 18.0% compared to the previous 12 months.
On top of that another $691 million of non-residential building work was consented in July, down 2.9% on July last year but that took the value of non-residential work consented in the 12 months to July to $8.986 billion, which was up 14.1% compared to the previous 12 months.
While those numbers suggest a substantial pipeline of work is being created for the construction industry for at least the next two years, there are also signs of pressures building in some segments of the market.
The most noticeable of these is in the construction of stand alone houses.
The number of stand alone homes being built has been in decline for some time as developers and buyers increasingly turn towards more affordable multi-unit dwellings such as terrace housing and home units.
In July just 1730 stand alone homes were consented throughout the country, down 25.3% compared to July last year, while 1853 townhouses and home units were consented, up a whopping 47.8% comparted to July last year.
One of the challenges currently facing stand alone housing developers is that baby boomers with an eye on retirement are an important part of this market, and they are likely seeing the value of their existing homes decline while developers and builders of the new homes they are keen on are facing rising costs, putting a squeeze on development margins and pricing options.
On the commercial property front there was a very sharp drop in the amount of new storage buildings such as warehouses consented last month, with the value of consented work for that type of building down 21.9% compared to July last year.
However the monthly numbers for commercial building consents can be very volatile, so it's too early to say if that is just a monthly aberration or the start of a longer term trend.
A more detailed quarterly analysis of regional building consents, including average build cost and cost per square metre is available on our Residential Building Consent Analysis page and our Commercial Building Consent Analysis page.
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12 Comments
I for one certainly thought the consents would have dropped off by now - kind of surprising. I suspect its only a month or two underway but the house price decline/shortages/interest rate rising environment has been in place for some time now.
I expect developers to do it very tough over the next 12 months, blood on the streets. I can guarantee you banks are re-pricing or withdrawing facilities as I type.
One of the challenges currently facing stand alone housing developers is that baby boomers with an eye on retirement are an important part of this market, and they are likely seeing the value of their existing homes decline while developers and builders of the new homes they are keen on are facing rising costs, putting a squeeze on development margins and pricing options.
Is there any empirical data on this? I kind of feel it's more Gen-X now, who are only ~5 years away from the first ones hitting super.
Could be 7 years away if robbo becomes PM. Imagine the chaos if David becomes top dog
Gen X would be no older than 57 this year, so another 8 years.
He was thinking they are 60 clearly.. it depends who you're asking as to the date BB end and GX start
Think of it like this.
The consents are lined up like speeding cars with very poor brakes following way too closely on a dangerous highway, and you are past the last off-ramp.
And the front car hits an object called no demand and rising costs.
As far as the cars/consents in the middle are concerned nothing has happened yet to make them think to slow down, and if they become aware of the crash ahead, they can't stop in time.
And the ones at the back very back either don't know and will get caught in the congestion or even f they become aware are hoping the road block will be cleared and by the time they get there, there will be nothing to see.
Based on what we're seeing come through in the market, the multi-car pile-up analogy is quite fitting.
Sadly, I suspect that although construction companies will hit the airbag (bankruptcy/liquidation) it will be the tradies ejected through the windscreen (left unpaid and unemployed).
This is nonsense reporting. Sales of new build units have fallen off a cliff.
The numbers are surprisingly high. But as I have said before, there will be an element of projects having got resource consent and starting the building consent process, and going on to secure consent given all the sunken costs - even if the prospects of building the project are remote.
And given the delay in council processes, with huge backlogs in many cases, consents issued last month will often have been lodged in April-May. Economic prospects have turned significantly more grim since then.
I will be hugely surprised if these numbers don’t fall at least 20-25% by year’s end.
Exactly right. There have been delays at every single step of the process. Surveyors, geotech, engineers, architects then the delays with councils themselves. Plus the regs just changed for RC’s. Consents frequently take 6 months or more to be achieved. Also, people suffer sunk costs bias, they’ll keep going with a project hoping that it’ll be okay rather than cut losses when they should. It’ll be the banks giving the reality check not the consent process.
Exactly Ginger (good to hear from you Btw). So yes consents issued in July, as you suggest many of those would have been lodged even earlier than April - May, some would have been February-March.
so building consent data is very much backwards looking.
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