The volume of residential building activity surprisingly fell by 1.8% in the June 2013 quarter, according to Statistics New Zealand.
It was the first fall in a year and followed a strong increase of 11% in the March 2013 quarter.
Bank economists think the surprising fall in activity could put downward pressure on the country's second-quarter GDP figures
The volume of overall building activity fell a seasonally adjusted 0.4 percent in the June 2013 quarter, after increasing 5.4% the previous quarter.
In Canterbury, non-residential building activity fell 17% in current prices in the June 2013 quarter, following an 18% rise in the March 2013 quarter.
Westpac senior economist Michael Gordon said the 0.4% drop in overall building work compared with Westpac's forecast of a 3% increase, with Canterbury being the main source of the "downward surprise" in the overall figures.
"Building activity was softer than we expected, putting downside risk on our forecast of 0.4% growth in June quarter GDP," he said. The June quarter GDP figures are set to be released on September 19.
"Building work put in place is lagging substantially behind building consents, which rose strongly over the quarter. So while these figures are a disappointment in terms of the June quarter national accounts, they don't detract from the sense that there is a tremendous amount of building work in the pipeline for the next few years. "
ASB economist Christina Leung said the decline in construction activity was unexpected, "and will weigh on GDP over the quarter".
"The decline in both residential and non-residential construction activity in Canterbury is concerning given our expectations the earthquake rebuild is gaining momentum.
"The issues the Christchurch City Council faced with its consent issuing process in recent months should not have been an issue for actual construction over Q2."
Leung said that along with the drought effects on agriculture production and primary manufacturing, the building activity result pointed to "fairly soft activity" in the second quarter.
"Our interim GDP forecast is now flat, down from 0.2% - though further key Q2 data are yet to be released.
"However, recent data point to strengthening activity heading into the second half of 2013, and we expect a strong rebound in economic activity in Q3 of around 1% [quarter-on-quarter] growth. In particular, Canterbury earthquake rebuilding will lift construction activity considerably over the coming years," Leung said.
Statistics NZ said the volume of non-residential building activity rose 1.4% in the June 2013 quarter, following a small fall in the March quarter.
Trends for all building activity volume continued to grow in the June 2013 quarter.
“The trend for residential building activity has been growing since September 2011, increasing by 33% over this time. The trend for non-residential building activity has risen 12% over the last year-and-a-half,” industry and labour statistics manager Blair Cardno said.
Overall building activity has been trending up since the most recent low point in September 2011, with growth of 23%. The current level of the trend for all building activity volume is now 17% lower than the peak eight years ago in the June 2005 quarter.
The trend for the value of all building activity in Canterbury, in current prices, has been rising for two years, and the level has more than doubled since June 2011. Across the rest of New Zealand, excluding Canterbury, the trend for the value of all building activity has grown 15% over the same period.
4 Comments
Hugh I think the average builder does realise the problems you highlight.
I'm not surprised at all by the fall in activity but I am surprised that some people didn't see it coming. The next quarter will also be interesting from what I have been hearing.
Some of these people particularly the economists don't get out of their offices and have a chat to those in the industry.
There are several reasons for the decline in activity and not all to do with new build projects.
EQC appears to be deliberately stalling some repair projects and placing them months out when they could be done now. There seems to be a practice of placing some projects into future dates so the builders can't do the work now. More and more people are having to obtain information from EQC using the Official Information Act and then they are finding large discrepencies in the records EQC holds e.g. land being placed in flood zones when it is not in a flood area.
In regards to the land price there are some builders who are holding land to obtain maximum price on that before building. They may have other projects that they are completing in the interim but the effect is still continued shortage and decline in volume.
Hugh,
It does seem from the article that limiting building in green belt areas in the UK is affecting the ability to build new houses, and presumably then house prices.
You always leave the impression that such restrictions are always the prime cause of inflated house prices in NZ. A couple of days ago you pointed us to some super profits made on rural land in Flat Bush in Auckland-(although in the story you linked to the super profits were based on asking prices, and not an achieved sale, but that is an aside.)
A quick check on the Flat Bush development; showed some surprising facts to me anyway.
Flat Bush is one of a kind in New Zealand. It's the country's largest and most comprehensively planned new town, taking shape on 1700 hectares in south east Auckland. It will be home to at least 40,000 people by 2025, a similar population to Nelson.
That is one one urban rural boundary, in the South East.
It wouldn't surprise me if the other 3-4 boundaries have similar capability and zoning allowances. Pleasingly in hindsight (I naively didn't realize Councils did this) the City Council bought a decent chunk of the land in 1995, at presumably reasonable rates for the time.
There are already 5 schools open in the area. Is building happening fast enough? Presumably as fast as Todd can sell the houses.
Extract:-
"Residential building activity has grown 33% since September 2011"
"Non-residential building activity has risen 12% over the same period"
The value of all building activity in Canterbury, in current prices, has been rising for two years, and the level has more than doubled since June 2011
Across the rest of NZ, excluding Canterbury, the value of all building activity has grown 15%
If we have learnt one lesson and nothing else from PDK, we know we can't grow at 15% per year every year to infinity
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