The total value of building work consented has declined by more than $5 billion a year over the last two years, according to the latest figures from Statistics NZ.
These show that $26.859 billion of building work was consented in the 12 months to September this year. That's down from $29.741 billion in the 12 months to September last year, and $32.350 billion in the 12 months to September 2022.
Most of the decline was for residential building work, with the value of residential consents dropping from $22.963 billion in the 12 months to September 2022, to $17.732 billion in the 12 months to September this year. That's a decline of $5.231 billion a year (-22.8%) over that two year period.
That saw the number of new homes consented decline by 17,055 (-33.6%) over the last two years, from 50,732 in the year to September 2022, to 33,677 in the 12 months to September this year.
The value of consents issued for non-residential building work, which includes commercial buildings such as shops and offices, as well as non-commercial buildings such as schools and hospitals, declined only slightly over the same time period. It dipped from $9.387 billion in the year to September 2022 to $9.127 billion in the 12 months to September this year, down just 2.8% compared to two years ago.
However, the value of non-residential building work consented may have been propped up by inflationary pressures in the building industry, because the total floor area of non-commercial buildings consented declined from 3,197,000 square metres in the 12 months to September 2022, to 2,293,000 in the 12 months to September this year. That's a decline of 904,000 square metres (-28.2%).
The charts below show the long term movements in residential building consents by region and type of dwelling.
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Building consents - residential
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Building consents - type
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37 Comments
I hope this will result in the building material wholesalers and retailers sharpening their pencils and actually becoming very competitive (which has been missing from the building industry for many years).
The markups on basic building/plumbing/electrical materials has been borderline price gouging/fixing.
It will probably do the opposite, many will go under.
The boom bust building cycle really needs to be stopped, the government should start building ASAP to pick up some of the slack (but not competing with private). We need counter cyclical investment in housing and infrastructure.
The suppliers will struggle to make targets and will be forced to drop prices. Pushing them up to make margin for short term gain will be bad for everyone involved.
I think you will find that many suppliers are very used to the high prices/gouging practises and it is built into their businesses now, ie they will be passing them onto employees that are demanding higher salaries. Some suppliers will be much more efficient than others. When the squeeze on pricing comes the efficient players will survive and all those that have gouged and believed that these higher prices were the new normal will go broke. I built a large premium house (for my family) several years ago. I imported many of the items from Europe, by-passed wholesalers ans retailers and went straight to suppliers in NZ, excluded anything made in China, and I saved a fortune. There is a big mark up on building materials.
Ain't nobody taking on debt to build a house that will be worth less than it costs, bud. Well except maybe OPES partners clients.
Hahahahahahahaha
thanks for the Friday Funny, Jim
We are in a bad way greed and price gouging has killed the Market.
You can't build a commercial building and get a return at the moment so what does everyone do stop best business decision.
As long as the likes of Council,AT, Tracffic management and all other consultants keep stealing off the people the market will go no where.
This country is going broken on the back of stupidity.
We need Chris Luxon and Wayne Brown and other leaders to get their hands dirty and clean out the likes of Worksafe ,Tracfiic management,Council and all organisations that have created all this compliance that's killed this country.
We are going nowhere fast until this mess is cleaned up.
This is now a leadership and vision problem
"Tracffic management" This is a safety issue and is embedded in the Safety Act or whatever it's called. The clause that says something to the effect "all practicable steps" is the showstopper and virtually guarantees being charged for a safety violation. If it was changed to all reasonable steps it would be far better but will become a litigation trough for the lawyers.
Traffic management 45% of the cost of fixing roads this is out of control and sending this country broke.
This country is not big enough to sustain this level of stupidity we are going broke on the back of this nonsense.
Plus all this traffic management around any sort of contruction and civil work going on.
This is just dumb and the leadership must stop it before we go broke.
Don't disagree with you but the base legislation is at fault and only the govt can fix that, not Councils as they'll be held liable if there's an accident around road works in their jurisdiction. So the safety legislation needs to be fixed.
It was interesting driving around Queensland amongst road works. Here in NZ the road would be closed, or at least reduced to one lane with thousands of road cones for miles bofore and after the actual roadworks. In QLD they manage to erect temporary barriers that allows the rest of the road to operate at a slightly reduced speed limit (80 kmph instead of 110) but otherwise doesnt restrict the flow of traffic.
Suburban streets use road signs painted on the road warning of upcoming pedestrian crossings, etc. Not speed humps. The speed limit is 60 kmph, and 40 kmph around schools only at times school is opening/closing. Cycle lanes are half the width of NZ cycle lanes, and dont take up a full lane of road.
You really realise how ridiculous driving in NZ has become.
I hope this will result in the building material wholesalers and retailers sharpening their pencils and actually becoming very competitive (which has been missing from the building industry for many years).
No it won't. It will lead to shrink-flation. People will build much smaller for the same price.
so back to normal pre covid level? when interest rates were 2%
Why would you even compare it to those times?
Reality is that new builds are going go continue to decline.
They talk about building more houses so it brings down prices.
Reality is that you can not make the numbers work ever again, to build to rent out.
The return is just not there unless rents double which is not going to happen.
Existing houses is where the rentals are going to remain and rents will continue to increase, as there will be a shortage in a couple of years.
But Luxon and co want overseas investors to buy up land, land bank and wait until the rents go up so they can build to rent.
What I do know is that we have more than enough immigrants in the cities buying.
Have a look at the online videos of auctions in Australia and you will see who the majority of the buyers are that are paying massive prices for crappers!
Been recently to Europe as well, and I can confirm that NZ housing is still pretty cheap.
My observation is that a decent chunk of the construction still happening is by Chinese developers with full Chinese crews. Having had one or two encounters with these sorts of operators, the crew will be getting paid pittance (minimum wage at best), and that’s how the developer will be getting it to work. Along with the use of cheap Chinese materials and fittings.
HM, even with cheaper Labour from China or Phillipines, I highly doubt there is any profit in these Build to Rent!
They may be doing it they say, they are building to rent for future capital gain when they sell, but you would question the logic of it wouldnt you?
Building in bulk and many on a section brings down the cost for the developer but there are so many of these apartments around so you would wonder when it stops.
The rental return on new builds would only be approx 3 to 4%, so why would you bother?
I don’t know if these are build to rent, or build to sell. I suspect the latter. However if they are build to rent, they could easily get yields of 5~6%.
They must be buying the land very cheaply and building all apartments to be getting anything like 5 or 6% return.
The people that will be renting them will be probably lower income people and be getting financial assistance.
No way on earth is anyone in ChCh getting 6% return on any new build!
Even as build to rent? My mate recently completed a 6 townhouse development, cost on each 2 bed townhouse circa 600k all up. He should get rent of $650 pw. That’s edging towards 6%
Would like to know what the build cost/m2 is excl land.
Just under 4k I believe
If they were lucky to get 650 per week less rates and insurance and without other expenses including a property manager etc, the return is more like 4.5% on a good day.
From what I know and see there is very little chance of covering costs on new builds unless interest rates drop immeasurably.
Existing houses with upside is where the profit is nowadays.
We will not be buying anymore to rent out, just not worth the hassle.and return is poor.
I am, last one I did in Ottawa Rd Wainoni cost 270k getting 590 a week. Of course I did it myself so not really a standard comparison
So you built on the back of an existing section obviously?
$590 per week in Ottawa Road is not bad for the area if they keep paying!
the crew will be getting paid pittance
Why pay them at all when you can get your staff to pay you (for NZ Residence worth many hundreds of thousands of dollars)?
Yes I am sure that is happening a bit
"declined by more than $5 billion a year" ...
That's a lot of productive economic activity gone, right?
So a 'real' recovery ain't happening soon then?
By 'real' I mean we actually create new stuff. But never fear ...
There will be a recovery that doesn't create new stuff though.
It's called dropping interest rates to create a 'financial recovery'.
You know the type, right?
Where we don't actually build anything, or create new stuff, we just sell existing stuff at higher and higher prices because the cost of borrowing goes lower and lower.
Apart from new housing
*sighs deeply*...but Chris, this time it is different, can't you see that inflation is going to roar back to life and mortgage rates will be in 15%+ 🤷🏻♂️
It is well and truly f**ked, and anyone cheering for construction to sink needs their head read with the damage it will cause...ah, well, watch em panic slash, then give it 18-24 months and the cycle will be too far well underway to stop again unfortunately. We are so sh*t at this.
Less building leading to lower demand for land from developers leading to lower land prices? What is the share of land in the cost of building a house?
Depends.
A large proportion of development in Auckland is townhouses now. Land as a % of total cost is typically around 25-35% per townhouse.
Yes I think that dynamic has been playing out big time in the last 18 months. Developers were bidding up the price of land in 2021-2022, some very silly prices were being paid eg. $1.8 million for circa 650 sq m in Manurewa
but I think that dynamic of land price slumps following that silliness is effectively finished
Wow, that's significant to say the least. I wonder if the government is taking notice yet or still asleep at the wheel. Wonder how Orr and the gang will respond.
Also read on RNZ this morning that ANZ think interest rates might be bottoming soon. Hilarity ensues.
ANZ are either very dumb, or very cynical
The article: Interest rate warning from country's biggest bank ANZ
Their words are hedged, as per always - and the headline is sensationalist. But let's be clear, bank economists work for their bank's profits first, and their customers second.
Methinks they're just taking the opportunity, on the back of a 1y swaps flatline with 2y+ swaps taking a short term kick upwards based on the no-rush words from the Fed, to get people to fix longer. Problem is, NZ Inc. isn't the mighty US economy (thanks to significant fiscal stimulus) and our RBNZ will have to chart a different course or we'll be into another year of Recession with even bigger job losses than the RBNZ is predicting.
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