The outlook for the residential building industry continues to worsen with the number of new residential building consents continuing to decline during June.
According to Statistics NZ, building consents were issued for 2178 new dwellings in June, down 36% compared to June last year.
In the 12 months to June this year, 33,627 new dwelling consents were issued, down 24.5% compared to the previous 12 months.
On an annual basis the number of new dwelling consents being issued has declined by exactly a third over the last two years.
The biggest decline in percentage terms in the June year was for apartments, with their numbers halving from 4021 to 1942 (-51.7%), closely followed by retirement village units -51.0%, stand alone houses -19.4% and townhouses and units -19.1%.
This will be having a massive impact on building companies' finances, with the total value of new dwelling construction, excluding the cost of land, falling by almost a quarter over the last two years. It's down from $20 billion in the 12 months to June 2022 to $15.26 billion in the year to June 2024.
Significantly the value of structural alteration work is now also falling for residential dwellings, dropping from $2.57 billion in the 12 months to June 2023 to $2.40 billion in the year to June 2024 (-6.5%).
The value of non-residential construction work is also a sea of red, with the total value of non-residential building work declining from $10.0 billion in the 12 months to June 2023 to $9.1 billion (-9.6%) in the 12 months to June this year.
And that doesn't take into account the effects of inflation, which have probably helped prop up those figures.
On an annual basis the biggest declines in non-residential work in the June year were for education buildings -29.3%, retail premises -23.5%, farm buildings -15.9%, hotel & motels -11.7%, hospitals and nursing homes -9.7%, and factories/industrial buildings -6.2%.
The interactive charts below show the trend in residential building consents by dwelling type and region.
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Building consents - type
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Building consents - residential
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82 Comments
This is bad, less housing supply.
This is good, clearly we have enough housing supply.
I can't make up my mind on what way I want to spin the story so i'm hedging my bets.
This is still decent supply considering the housing market is in doldrums
I'm disappointed in myself for not hedging against this being a satisfactory housing supply.
My spin returns are in shambles.
This'll make residential builders sharpen their pencil instead of cocking a snook at requests for quotations. The construction industry and you could probably include commercial in the mix have had it far too easy in previous years with residential construction work being plentiful.
"This will be having a massive impact on building companies' finances". Yes it will. And if they want to survive, they will have to do what the UK builders did when they faced a similar situation ~30 years ago - build flat; for no profit. Just cover the costs. Lower their finished prices to encourage those buyers that have the capacity to buy. It's the only way to keep their teams together. And making no money for a few years but being ready for when the market clears is better than going out of business altogether.
Financially, you'd be better culling your team. No real point running a big crew with the aim of breaking even, you will invariably lose on a number of jobs.
There's been such a big shortage of trades, absolutely anyone had been able to get a job, regardless of competency or ability to show up 5 days straight.
Incredible that the market was profitable enough for the individuals you mention to maintain employment then isn't it?
Seems the returns were far too high if useless employees were able to get and keep work while not showing up 5 days straight. Or you're not telling the truth.
The least productive employees are the ones that set the market rate. So if you have a firm that can operate at that, or preferably better, you'd do ok. Especially if you hire based on competency, rather than maintaining headcount.
You’ve described a quarter of the NZ workforce 😂
NZers have the option of simply shifting to Australia, and working on one of their many multi-billion dollar infrastructure, housing or Olympic projects.
FIVE BILLION is big bucks. The extent that it ripples through the economy, builders, suppliers, sub-trades, architects, designers, homewares, WAGES, etc, etc, must be massive.
Is there an accepted multiplier effect? I'm guessing at least 3x.
Big hurt for the economy!
Construction is one of the last remaining manufacturing industries we have at decent scale.
We all sink together.
The far reaching flow on into the economy from the construction industry is massive…anyone celebrating this is an absolute numb nuts 🤦🏻♂️😂
We really want (need) a manufacturing industry that makes products for export.. or components for products that are exported.
We import, construct and consume a lot.
We need to sell services and products made here... overseas.
Construction's one of the only remnants, because we want most other things made by the cheapest labour possible.
If it were feasible to have someone make houses for us for a few dollars an hour, we'd do that in a heartbeat.
We have dairy and other agri products, oops that went down like a lead balloon
Agri is sweet. Do we have the capacity to grow it substantially and raise the margins tho?
And then is that really a balanced economy or all eggs in one rusty bucket?
Have you tried running a company, staff have rights and employers have responsibilities. There are lots of busibody bureaucrats only too pleased to ruin your day. The rbnz and nz banks are doing their best to rip off ahh assist their customers, look at the falls in non resi construction, farm buildings are down -15.9%, hotel & motels -11.7%, and factories/industrial buildings -6.2%. Its a sea of red out there
Yep we do, but what is that? I’d love to hear a few ideas of what these ideas look like in a real sense
Something in demand, that NZ has a huge competitive advantage in.
Get on it!
this headline will not help new builds
Rent yield gap of 4% ‘largest in 15 years’: Why would you borrow to become a landlord?
https://www.nzherald.co.nz/business/crushing-4-rent-yield-gap-largest-i…
- New Zealand has 2,056,578 dwellings, Census 2023 showed.
- 663,700 of those places are rented, Stats NZ quarterly figures show.
- Those places are home to around 1.3 million tenants.
- But high interest rates at 7% and lower rental yields of 4% mean investment is harder.
The crushing negative gap between what landlords are earning in rent and what they are paying in mortgages is the largest in about 15 years, an economist says.
Kelvin Davidson, senior property economist for data business CoreLogic NZ, said there was roughly a 4 percentage point gap between those rental yields and average two-year standard fixed mortgage rates that had persisted through the year so far.
Average residential rental property yields were only 3% yet mortgage rates were closer to 7%.
What that means is investors’ incomes are a long way from covering their mortgages. Landlords who have borrowed heavily must top up the difference.
The disparity between gross rental yields and mortgage rates marks the widest gap observed since 2008, Davidson said.
Why would you borrow to become a landlord?
Subconsciously because "that's what society tells me to do."
Let's not beat around the bush. It's psychological warfare out there.
Sure would’ve been an ideal time for kiwibuild/state builds to kick off, instead of competing with private during the boom
Great point.
If only there was an instant reaction time between signing a document and picking up a hammer.
Sure, but they could lay the conditions for a running start when a downturn starts, instead of spending years in consenting, designing etc.
The demolition response to the chch earthquakes was super fast.
That is a significant outlay to have waiting idle, some of which would be subject to expiry before work starts.
And a downturn is usually what, a couple of years? So you'd effectively be deferring work for up to a decade at a time, then trying to get it all done in 24 months.
Like, it seems logical, but it practice, not so easy.
Chch was enacted under emergency legislation. Although I'd argue if we do have a housing crisis, that should also be treated as an emergency.
I’m not saying that it has to perfectly match the inverse of the business cycle. There would be some overlap. But that’s better than wiping out a large portion of the construction industry.
Yes exactly, we’re talking about the state here. Why not just brute force the regulatory obstacles.
"If only there was an instant reaction time between signing a document and picking up a hammer."
I love your comments, Pa!nter. It's clear that, unlike so many theorists, you have worked and owned your own business. Keep keeping it real !
Thanks, I'm here all week.
It is understandable in an age where you think of what you want, press a button, and it's here in 2 days, that there's a disconnect in knowing how much time can go into making things physically happen.
This downturn didn't just start with this press release, it's been clearly happening for the last year or so, and was predicted before that. It's never going to be possible to align the response perfectly, but having a government response to take the worst out of the trough in activity will be much faster than what we will end up getting via the RBNZ lowering interest rates.
Instead we have a government doing the opposite by cancelling planned Kainga Ora construction which will exacerbate the downturn.
I have been banging this drum for years. How KO was allowed to compete with private was just disgusting and now they have no money to get better value.
What an absolute rip off that whole KO executive team have overseen.
In fairness, if you have an immediate housing shortage, waiting for a market to turn may not be a good strategy.
This will show itself in the market.
But 2 - 3 years from now.
Until then, down we go.
"You ain't seen nothing yet
B-b-b-baby, you just ain't seen n-n-n-nothing yet
Here's somethin' that you're never gonna forget
B-b-b-baby, you just ain't seen n-n-n-nothing yet
Nothing yet, you ain't been around"
Bachman Turner Overdrive
B-b-b-baby.. wat U saying
Ray Charles
Yep the blind leading the blind on here.
I'm saying consent numbers lows are not reached yet. "You ain't seen nothing yet" and it won't be something we forget.
Like 87, dot com and 08 this will be memorable and the memories have yet to be made.
In my own small world - family with business turnover down over 30% in last 12 months and may still be declining. They put off capital investment but havent laid off staff... yet. Another business I am aware of has gone to the landlord for rent reductions to avoid closure and calls on the home mortgage used as colateral. Two others laid off 20+ staff each. I have no idea how my local takewaway shop is still open given the volume of trade it does and size and location of premises. Looks like a family working 120 hours a week between them and returning a wage for 80 hours, if that.
My uninformed opinion is this is gathering pace and its worse than my previous cyclical experiences over the last 30ish years (were i was paying a bit of attention). The highs were higher. The correction seems like it will be stronger.
Useless anecdote "I reckons" over and out. Time will tell if my gut is useful or useless.
"Like 87, dot com and 08 this will be memorable and the memories have yet to be made."
Property is the largest industry in NZ according to this website.
The results were startling; in the decade from 2009 to 2019, the property industry’s direct contribution to GDP has ballooned from $21.6 billion (12% of total GDP) to $41.2 billion (15% of GDP).
https://www.propertynz.co.nz/industry-impact-report
Remember, at the peak, residential real estate in NZ reached NZ$1.76 TRILLION. It is the largest asset class in NZ. The fall in value of residential real estate in NZ since the peak is over 70% of GDP. When has the collective wealth of NZ households last experienced a loss of wealth of this magnitude relative to GDP?
The bigger the party, the bigger the hangover.
Like 87, dot com and 08 this will be memorable and the memories have yet to be made.
This feels more like the early 1990's inflation induced recession that NZ and Australia (and most of the world) went through. I recently came back from Melbourne, and its in dire shape. The last time I remember Melbourne being so bad was 1990-1991. The dot com and GFC barely registered, and I was living there then.
73000 more departures than arrivals in May and June combined according to NZ Customs Stats.
How many new dwellings do we need?
Whatever number of houses it takes to bring prices down to 3x household incomes. We don’t live in a communist state; there is no fixed “need”.
Oneroof report out with Auckland down another 2.4% over the quarter
This one? TA -
The problem is that the buyers in the market are still worried about a great number of things. Thirty-eight per cent of agents still say buyers are worried about prices continuing to fall after they have made a purchase. Fifty-one per cent say buyers are worried about their employment and income, while 63% say buyers are still worried about getting access to finance.
But good ol TA cant help himself -
But it looks like the corner of the downturn has been turned and things are set to get better. How much better?
This is the reason why house prices dont rise until the end of an easing cycle, not the beginning. Buyers wait until both house prices and interest rates stop falling before buying. Until then they sit on their hands while telling themselves "If I wait 6 months, I will be able to buy something cheaper/better, and my mortgage payments will be lower".
"Buyers wait until both house prices and interest rates stop falling before buying. Until then they sit on their hands while telling themselves "If I wait 6 months, I will be able to buy something cheaper/better, and my mortgage payments will be lower".
Price trends / momentum impact house price expectations of buyers and their behaviour.
Contrast current conditions with conditions of rapidly rising price trends / momentum and there is fear of missing out. Under those conditions, people have urgency to buy otherwise the house price will become unaffordable and get out of reach. This was in the 2020 - 2021 period. In early 2022, buyers thought it was an opportunity to buy the dip.
"But good ol TA cant help himself -
But it looks like the corner of the downturn has been turned and things are set to get better. How much better?"
He needs to give his readers / audience some hope. Otherwise it will hurt his vested financial self interest - subscribers to his newsletter might unsubscribe, property promoters will not employ him for public speaking at seminars, conferences & webinars, etc
We don't need houses. The demand was brought on by our economic policies when we had a booming population and our 'growth was driven by a house price ponzi scheme keeping and attracting people to buy them... that is now collapsing for these reasons.
- our birth rate is slowing
- young smart kiwis are leaving for better ways of life with more money,career prospects and affordable housing in au (with better public services and infrastructure
- we aren't an attractive destination for young smart foreigners (vs their many other options).
- the old are selling their houses up And we have a glut of retirees coming through
- we can't import unskilled people as they can't contribute enough tax to pay their share of infrastructure and public service. The more that arrive the worse off we all are.
House prices are falling and not coming back as an economic driver. We need a strategy to make ourselves attractive for young skilled peeps and rebuild nz Inc.
Let’s hypothetically say we get to 3X, is it from house prices dropping or wages increasing, a mix of both…? I’d seriously love to hear you map out the pathway there please? No point just waffling on without a plan 👏
The number of European births in 2024 are down 14% from 2023. Presumably these missing babies are now new little Australians. So you can factor in a generational shift in the number of new houses required.
Theyre just not being born at all.
We will stopgap the falling birth rate with migration. But then the kids of the migrants invariably adopt the birth rate of their host country.
No, its a particularly European thing. Maori/Pasifika births were down about 4%, but still within the same range as over the last couple of years. Asian births were up 12%, and for the first time exceeded the number of Maori births. They still have a long way to go though, to make up for that huge drop in European births.
It seems NZ is turning into South Africa quicker than anyone anticipated. Maybe NZ Europeans can start claiming political asylum in countries other than Australia? I've always fancied Spain myself.
Coming straight to you from the coal mine (air con and electrical services) it’s incredibly quiet. The new builds backlog has all but been completed. In a couple of months for a lot of tradies out there they will have finished the last of the big projects, there is nothing new coming in. I’m not being asked to quote anything! For context I used to have anywhere from 10-20 quotes in a week come across my desk. Those who worked hard over the boom times, made the most of it and didn’t take on too much debt will be OK, those who lived large thinking the party would last forever, well.. lesson learned you’d say.
Any tradie who thought 2020-23 was going to go on in perpetuity, and raised their overheads inline with that, will be sad.
Any decent tender is now getting 8-10 bidders. 2 years ago that'd be 2-3. Or even 1, in some cases.
Hard times incoming for sure
Much the same here in civil/3 waters. Our work generally precedes a lot of residential construction, so our industry can be a lagging indicator.
My Son, the builder, is now, My Son, the sales rep. Pivoted after working for a 6 month string of dodgy contractors. Best decision he ever made in my opinion. I guess the youth (mid 20s) arent all leaving with their skills, he will struggle to go back to building with the company car, regular salary, holiday pay, sick leave, health and other perks. The whole building industry at the pointy end needs a massive rethink, the apprentice as a contractor gig is hard for a youngster.
Contractor model is a complete scam no matter what stage of your construction career you're at. As a lot of young tradies are unfortunately going find out very quickly.
Thanks for posting, appreciate the coal face input and observations.
The downturn is still yet to be felt due to the lag. Give it another 3 months.
The real question is are construction costs going to come down? It’s uneconomic to build so whatever the fix is, it may take some time to come through.
Good tradies will have work. Bad tradies will go to Australia.
They'll come down by whatever discount someone will offer to win work.
I think 3 months is too short, the construction downturn will last all of 2025 at least IMO.
And refer to the atrocious confidence result for construction from ANZ survey
The lead times in construction mean their forward optimism can be more accurate than a business who just expects things to rise and fall seasonally.
So maybe everyone else will be sadder closer to Xmas.
Canterbury broadly following the trend but not to anything like the same extent as Auckland or Wellington. Or property market seems be its own little thing here in Chch. You see it in the auction results which are usually less rubbish than the rest of the country.
As someone near Canterbury and who bought a house in the not too distant past, I noticed anecdotally that the housing price movements in Canterbury (particularly Christchurch) were less pronounced during the covid-era boom. It would not surprise me if there is less downside as a result in the region.
Correct.
Not sure what part of Christchurch you are in, but my house (and those around me) appreciated 60% over the Covid period. And havent gone down.
I was also in the market for a renovation project and over 2021 and 2022 the prices of old properties appreciated 50% minimum, meaning that I never ended up buying one as prices were moving up so fast, I always ended up missing out as they blew through my price limit.
Christchurch market is the most stable market in the country.
Nothing surer than prices will increase as more and more people move to chch for lifestyle.
The average is being lowered significantly by the addition of the small townhouses and houses on sections will become more popular.
Christchurch doesnt have the pile up of listings like the other cities. Prices are holding up. Houses in good school zones sell quickly. The only blot on the landscape is the proliferation of dinky townhouses with no garages, which seem to have been built with no buyers on the horizon, developers crossing their fingers and hoping to find a buyer upon completion. Well, most of them are completed, and they havent found buyers .......
These stories got about 5 comments 2 years ago…
apologies for sounding conceited, but ‘told you so’
too bad that things weren’t done to mitigate the carnage
FYI, a story from Nov 2021 with 3 comments
https://www.interest.co.nz/property/113037/new-homes-are-being-consente…
I will give you that one HM, you were pretty much the only one on here predicting a building crash. Not good for house prices when it all turns around though is it ? up up and away because the lag to get a new house built is over a year.
I disagree. The demand is just not there. Too many people leaving NZ and all the downsizes are killing demand.
Where have all the images gone from the front page?
David commented in Monday's breakfast briefing about it. Unsure why it was directed specifically at readers not logged in, so I assume it's the same issue he's referring to.
by David Chaston | 29th Jul 24, 8:29am
To readers not logged in, we apologise for the lack of story images this morning. They will be returning very soon.
Yeah im logged in and no pics for a few days
Seems the issue is when people are logged in. Try opening interest.co in another browser or logging out of your account, the pictures will come back.
Obviously not a great fix though!
Hopefully this will reduce global warming.
Townhouses have recently accounted for around 45% of all new dwelling consents across the country, compared to just 6% back in 2012......Trade Me property e-mail.
The Prime Minister owns a few properties and he's a very smart guy. I doubt he's anticipating losing lots of money.
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