The growth in new housing developments appears to be slowing - just at a time there's huge concern about housing shortages, particularly in Auckland.
Any continued slowing in the rate of growth in housing developments could put further upward pressure on house prices.
The Reserve Bank's already concerned about rising house prices and the impact that a 'housing bubble' could potentially have on the financial stability of our major banks. The RBNZ's clamping on "speed limits" on banks' high loan to value lending from tomorrow. See here for articles on LVRs.
The number of new houses approved in August, excluding apartments, rose a seasonally adjusted 0.8%, according to Statistics New Zealand.
Apartments
If the volatile apartment approvals - which rise and fall hugely month-by-month - are included, then the latest figures showed a 1.4% rise.
Statistics New Zealand said, however, that the "trend", which had been rising for the past two years, was now showing signs of flattening out.
"Following a sustained rise from 2011 to 2013, the trend for new houses seems to have levelled off," industry and labour statistics manager Tehseen Islam said.
"The number of new houses jumped 13% in April, but hasn’t changed much since then."
In August, 1633 new houses were consented, as well as 127 new apartments, making a total of 1760 new dwellings. Included in the apartment figures were 10 retirement village units.
Together, Auckland and Canterbury consented 55% of the new houses and apartments.
Auckland
In Auckland there were 503 dwelling units approved in August, which was up 33% on the same month a year ago. And while the numbers in Auckland are continuing to rise on an annualised basis, this is off a very low base of only about 4000 new houses a year.
In Canterbury there were 469 dwellings consented in August, up 19% on the same month a year ago, but on a seasonally-adjusted basis the latest figure was down slightly on that for July.
Westpac senior economist Michael Gordon said the Auckland figures were "the main drag" on the August figures.
He estimated the Auckland numbers were actually down 11% on a seasonally-adjusted basis from July.
"The regional breakdown tends to be choppy from month to month even after seasonal adjustments, and the Auckland figures have seen similar short-lived declines within their upward trend over the last two years. Nevertheless, the number of consents appears to be taking a great deal of time to reach the levels needed to meet demand," he said.
Shortages
Auckland has a perceived shortage of about 30,000 houses, which is being tackled by a new Housing Accord between the Auckland Council and the Government, which takes effect today.
The accord targets 39,000 new homes in three years.
At current rate of progress this year Auckland might have consents for about 6000 new houses in the full calendar year. This would be higher than in recent years, but still a long way short of the target 9000 in the first year of the housing accord, rising to 13,000 in the second year and 17,000 in the third year.
Auckland has briefly touched as many as 12,000 new houses in a year in the early 2000s.
'Concern'
ASB economist Christina Leung said the apparent slowing in residential building consent growth in Canterbury and Auckland was concerning, "given the more acute housing supply constraints in these two regions".
Leung said residential consent issuance in the Auckland region totaled 5616 for the year to August 2013.
"Hence it is likely the housing supply and demand imbalance in Auckland will take many years to be resolved, and the turnaround in net migration inflows is likely to put further pressure on the housing stock.
"In Canterbury, we expect an improvement in residential construction activity over the coming years given the considerable amount of rebuilding and repair work that still needs to be done.
"However, the recent slowing in dwelling consent issuance suggests some risk in the near-term that residential construction in the region will not pick up by as much as we are anticipating. We will look to trim our near-term residential investment forecast should the trend of slowing dwelling consent issuance continue over the coming months."
Constraints
Leung said housing supply constraints were likely to put further upward pressure on house prices over the coming years, "although we expect annual house price inflation will peak by early next year".
The value of consents nationwide for all buildings, including both new work and alterations, was $1.016 billion in August – $678 million of residential work and $338 million of non-residential work.
Earthquake-related building consents in Canterbury were valued at $59 million in August, and included 58 new houses. Since 4 September 2010, $1.216 billion of building consents have been identified as earthquake-related. This includes consents for 1,059 new houses and apartments.
Building consents - residential
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5 Comments
Talk about kicking the can down the road! LVR restrictions may have taken the heat out of the property market.. don't blink or you'll miss it.. But the lack of building activity which by recent accounts we can expect even less of going forward gives me great faith property prces in Auckland can only head one way.
Can someone please explain to me - why don't we implement policies that encourage building new houses? If this rapid house price inflation is caused by a shortage of houses why are we seemingly doing all we can to restrict their supply? Am I missing something?
Hugh - the trouble is the opposition parties will not be able to effect change in housing numbers with their policies either.
National actually have to pull it out of the bag now. If I were them I'd be allowing open slather on the fringes now. Christchurch is slowing and some Tradies are leaving town siting no work (especially the painters). not being paid is another reason.
Some of the prices of realestate have gone crazy. 3 bedroom, 2 bathroom house in Avonhead had a cash offer of $750K at open home. Another in the St Albans area 4 bedroom, 1 bathroom sold for $475K on TC3 land and this one had a lot of unconsented work done on it. The Avonhead property had had its earthquake repairs completed but there were visible signs of cracking on the ceilings and no asbestos testing had been carried out on suspect ceiling compounds on both houses, Neither property had proper foundation checks completed. Both showed visible signs of sloping floors.
Both these properties required new kithens and bathrooms and a major update internally.
Buyer beware has been recklessly abandoned. New owners would have got better bang for their buck in Selwyn or Waimakariri and not have the large rate increases that are going to plague the city for years to come.
The housing companies have a lot of meat in this market and loads of land and house packages with set prices. I have not had time to compare pricing properly but am suspicious of this market and the game that is being played. Normal market competition mechanisms in regards to pricing don't seem to be applying. Slap up, low end materials with a few added electronic fittings getting priced higher than what I reckon they should be. I get a feeling that there is an agreed-to minimum price and will be doing some more homework on this very soon.
Interesting sidebar to all this from the Auld Country, which of course perfected the Town and Country Planning Act.....and is currently being inveigled into another round of 'We Know Best' from the usual suspects - the 'use it or lose it' retrospective legislation championed by Red Ed..
From a major (10% of the market) practitioner. A certain amount of talking your book, to be sure, but lotsa Facts, too.
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