Building consents for new houses, excluding apartments, fell 1.3% on a seasonally-adjusted basis in January, according to Statistics New Zealand.
The fall was not unexpected, given that it comes following very strong, double-digit, rises in activity in both November and December.
If the volatile apartment figures - which rise in and fall a lot from month-to-month - are included, the seasonally adjusted number of new dwellings consented fell 8.3% in January.
“Apartment numbers returned to a lower level in January, after recording high numbers in November and December,” Stats NZ's industry and labour statistics manager Blair Cardno said.
Stats NZ said the "trend" for new dwellings, excluding apartments, was at its highest level since January 2008, and was 79% higher than the most-recent low point in March 2011. However, it was still 24% below the series maximum in September 2003.
Together, Auckland and Canterbury accounted for 58% of the new dwellings. In Auckland, 433 new dwellings were consented, while 520 new dwellings were consented in Canterbury.
ASB economist Daniel Smith said Auckland and Canterbury saw lower consent issuance in January but continued to strengthen on a trend basis.
"For instance, Auckland consents were around 20% below the December level according to our seasonally-adjusted estimate, but were still 15% above the levels seen October. The three-month moving average for both regions continued to rise as well, reaching the highest level since 2006 in Auckland and the highest level on record in Canterbury."
Smith said although the overall national figures were slightly weaker than the previous month, January’s data on consent issuance pointed to continued strength in the construction outlook.
"The main drivers of increased building activity will be the Canterbury rebuild and house-building demand in Auckland. Both regions have shown very strong growth in consent issuance over recent months. Greater building activity will be a double-edged sword for the economy. More construction will ease pressures in the housing market, where supply shortages have pushed up prices in Auckland and Christchurch. But higher activity will create more competition for resources and additional inflationary pressure. So far, the evidence is that construction costs (and labour costs within the sector) remain relatively contained."
But Smith said that with inflationary pressures likely to grow as activity continues to ramp up, ASB economists expected the Reserve Bank to begin "a gradual cycle" interest rate hikes next month.
In January, consents were issued for 1640 new dwellings. This comprised:
- 154 apartments (including 88 retirement village units)
- 1486 non-apartment dwellings.
A total of $930 million of building work was consented. This consisted of:
- $642 million of residential work
- $289 million of non-residential work.
Data for building consents is obtained from all territorial authorities in New Zealand.
Compared with the same month last year the January consents figures, excluding apartments, were up 26%, while including apartments, they were up 25%.
Including apartments, 13 of the 16 regions consented more new dwellings in January 2014 than in January 2013.
The regions with the greatest increases were:
- Canterbury – up 142, to 520 (including 27 apartments)
- Auckland – up 61, to 433 (including 68 apartments)
- Wellington – up 35, to 127 (including 59 apartments)
- Waikato – up 33, to 137.
Building consents - residential
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43 Comments
I don't know you can blame LVR, as this is falling back off a December/January peak (after LVRs). Even falling back of the peak the like of which has not been seen since just before the GFC, the overall post-LVR value of consents is still well above pre-LVR.
There doesn't seem to be much of a match to interest rates either, as building consents only picked up last year and Interest Rates have been low for a long while.
But people very often don't pay off the debt though.....they keep treating their houses as ATMs and borrow more.
Hence, no difference between today and 6 years ago.
If they could afford 9% then, they can afford 9% now.
The fact their equity is increasing more slowly at 9% than 5% means they cant go out and borrow more.
Mr Wheeler's actions will be beneficial to them over time, as most will end up with less debt.
You still don't get it.
Mr Wheeler knows too many people keep borrowing instead of paying off debt.
He is going to make that more expensive.
I get it allright, and those with high debt levels are about to find out as well.
They could afford 9% six years ago, they can afford it today.
No difference.
5% interest pays off debt you say ?
Nope.
"The saying "the more you earn, the more you spend" is true, says Tierney.
The family's income falls to $70,000 but they continue spending as if they have $100,000 coming in the door.
"It can take a while for this to filter through if they have cash reserves, assets they can sell or a line of credit.
Eventually, it will catch up on them," he says."
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=112…
Dumbo Wheeler and his merry band of economic thugs is prepared to sabotage a Christchurch rebuild
A very odd statement. The residential rebuild is being paid for by insurance conpanies not new mortgages. The insurance company will repair or replce regardless of interest rates. The commercial biuldings are a little different and hampered by the daft cost of land in the CBD still, which in turn means an extra required lease price which is keeping many tenants away. Either way the interest rate is way down on a list of escalating costs.
What borrowings would that be cowboy ?
Here ia an example from todays paper.
"He cites the example of a client who has done about four top-ups in the past 12 months. The client "needed" to upgrade his car and then the spa pool needed repair.
"Clearly he doesn't have the cash flow to provide for those things. You know they are not being really smart."
It's common, says Bawden, to have clients who top up their mortgage to pay off credit cards. This is smart if they have changed their ways and won't keep spending. But mostly that isn't the case."
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=112…
Time for interest rate rises to curb this behaviour.
The banks have, until recently, been falling over themselves to allow tops up and revolving credit mortgages.
They don't care if they spend it on a cheap holiday in Fiji in summer.
Homeowners have been lapping it up, as if there is no tomorrow and capital gains will save them.
The RBNZ is now reigning that in.
LVRs, Capital Adequacy Ratios, and hopefully soon to be interest rate rises.
Tomorrow is here.
duh
Legally they aren't allowed to care. Because that means they would be using their financial position to control *your* business and invade your privacy and ownership rights. That is fundamental principle of NZ law.
As for which borrowings.... any borrowings. There's no difference between homeownership, overdraft and credit card. The debt is the same, risk and repayment change but the repayment is ca$h money.
It's what you do with it that makes a difference to you, which has nothing to do with your theory about rising rates being good for loan holders.
you're mixing up cause and effect.
Those who survive the downturn by paying down, become the cash rich in the upturn.
That's why we end up in a position with so much brinksmanship. Drive as fast as they can at the wall, playing chicken if you like. Take no risk, and inflation and progress will destroy your holdings. Take too much risk, and splat. Thing is the no risk option is guaranteed failure, unless you're already in the paid up top 1%, secured from the multiple previous cycles.
Are you fully paid up in the top half of the 1% spottie? is that why you can't see what the rest of us have to do to bootstrap ourselves? Do you have a couple of mill personally tucked away for your own efforts? You think that's do-able by what % of school leavers?
I was, like many, used to having a 2nd and 3rd mortgage paying up to 18% interest at one time.
I always made sure I had a buffer in my budget however to cover rising costs.
I didn't spend money on shiny new things, but saved that money in case my costs went up.
If people have been borrowing to the max, and spending on non-essentials without budgeting for a rise in interest rates, then they are in for a bit of a shock.
They may have got used to 5% interest rates, they are probably about to see the folly in that.
If you have buffer in your budget that's fine.
You have equity/cash sitting around making 1% or less, that could be saving you 5 - 30% paying down debt.
I know people who have "regular cash savings", yet month to month don't pay off their credit cards.
And yes they've probably been betting on good times and relying on the government to do what is best for them and the country...without realising that as soon as better economic times comes along that RBNZ will push up the OCR to make sure our economy won't improve.
But yes, consumer borrowing, and business without proper budget are just feed for the daisies.
I do wonder why a bank is allowed to get money at 3%, while others must pay more.....(for the same dollar). Wouldn't it make more sense to lend that money directly to producers (primary, manufacturing, services) for improvements rather than imposing a banks' slush money as a compulsory penalty.
(Addendum: for budgeting it often works out more effective to reserve portion of credit than to lockup cash in cheap accounts)
"Those who survive the downturn by paying down, become the cash rich in the upturn."
I agree, those who have used the downturn and subsequent low interest rates should do well.
We are now in an upturn.
Those who have continued to borrow, borrow, borrow; without budgeting for an increase in rates will be in trouble.
To succeed when the market bottom is just a matter of survival. Cut and hold on, roll debt over, those who live to see the next day are the winners.
Much harder, and different mindset to succeed during the upturn.
Those who do not take risk will be left behind.
Those who overextend feed the roses.
One persons bold is anothers' defenestration.
Budget for an increase in rates is sitting on the fence, sitting on the fence always fails :)
No they won't own the fence, as the cost of living will rise due to government pushing inflation, and the ever-increasing rates bill for the land & capital improvment (fence)...not to mention the need to keep up with new fence laws and rules and Warrant of Fencing "guidelines" which must be met. Because they aren't borrowing they will not be able to match the growth that leveraged people are getting, so will be inflated away, finding themselves asset rich, cash poor.
Those who have overborrowed, never lost it because they never owned it.
And those who scrape through will have maximised equity, and will be in a position to acquire the fences that others were sitting on.
Which is why they're failing miserably.
Who does the biggest leveraging?
People with
Security
Revenue
What do you need to beat LVR...more security
What do you need to beat OCR...plenty of revenue, especially of the price setter kind.
The way that you're talking the answer to to alcohol is to give all the booze to the alcoholics so that those who drink in social and moderation won't get drunk.
PS your comment re:interst and working multiple jobs. I don't think you appreciate how fortunate you were. When I was a school leaver, having more than one job (even parttime) was considering "moonlighting" and was actively discouraged. Which was daft because I remember opening newspapers and finding maybe 3 jobs, maybe 7 jobs listed in total, most not in my town. Many days there were none listed.
Very hard to network as a school leaver with no money and relying on public transport (and my little 100cc motorbike didn't lend itself well to long trips or dressing well).
No, you're not. I betcha you can't help yourself and are forced to reply.
At least we agree that when risk is high interest rates must rise.
Let's settle for 8%. Even I don't think 18% is required.
The good news is the RBNZ guv'nor seems to be more inclined to my way of thinking than yours.
His opinion is the most important.
Roll on the rise.
I'm signing off from this thread now, as it's off the front page.
I'm sure I will have the chance to educate you further on other threads.
caio
Alter Ego ..... that is exactly the problem, as nearly everyone is running around like chickens with their heads cut off trying to pay off debts, mortgages etc !!
If the collective of society said "enough debt is enough debt", stopped trying to "keep up with the Jones's" and lived within their means, instead of relying on "overseas printed money", corporate welfare to top up salary/wage bills, WFF, accom. supplements etc etc there would not be these issues.
Business would run, as in a "true" free market and the price of G & S's would find their own "price point" ...... not an overinflated one, just to keep the banks happy, so that they can increase their mortgage loan book !!
Time for Enzud to stop the "Property Ponzi Scheme" and get back into R & D, new & niche markets, innovative and value added products, etc plus increasing productivity.
Imagine if all those residential property mortgage repayments were instead going to develop new business .......fat chance .....as I have posted so many times .... too many VESTED INTERESTS.
Thank you Crazy Horse.
I'm running around like said chicken, to pay the mortgage for my families abode.
Please tell me where I send my application for the free/ultra-cheap house/accomodation YOU are offering.
Sadly me and my family _NEED_ somewhere to live. And when I left school and made 18k a year, that didn't leave much to save to buy a house for cash. (1987)
I assume school leavers and other low income earners get a bit more now, so my eldest is leaving college soon, so expecting income around 34k for him. My money is tied up in my business paying off existing debts (for the business).
What kind of house are YOU offering for a person making 34k p.a. (before taxes, transport, student loan repayment, medical, food, utilisties)
Or are all these debt free properties "someone's elses problem" to be Magically Mystically Miraculously Created out of nothing (by someone else, not you, of course)
No, we would all be sitting pretty, not worrying about a trivial increase in rates, like some, not a million miles away.
Each and every person could have a happy home, not an investment.
We would not need two people to pay off the householed debt.
Nor have to import rich traffickers, bailing out of a zany world.
One mans house would be his castle. But his ever loving wifey could raise her own kids, not rely on others to
There would be no need for landbanking, tax dodges, Single parent subsidies and housing.
We used to live in paradise, a simple house would do and did. Mum looked after the kids, there were no real problems.
Then we created them.
Now this nutty world is being ruined by ticky tacky boxes, done up like a dogs dinner, to on-sell or rent to bigger and bigger idiots or bigger and bigger one parent families.
The fools have taken over. We need ever more debt, to service, ever more debt.
We have borrowed our way to purgatory.
And some are laughing all the way to the Fractional Banks.
May I ask a simple question, why did the banks force down the interest rates to inflate away debt.
It was YOURS.
Still is...and plenty copied it.
Capital Gains.
They did not, nor could ever stand Capital Losses.?
Do have a pleasant day.
which would be fine if we all started in the post consolidation phase of earning. How quickly they forget the struggles of earlier on...perhaps it's all those politicians and governments with family sponsorship....
The problem with your plan there, is that when young, many people have no funds. Just affording the clothes to get to an interview or to pay for the "Student Union" fees can be months worth of income. Let alone getting a freehold house.
Now if you're magicing up scarfies first million, or a free freehold house for each school leaver, then yes your plan will work. But, that's not what happens - people with nothing have the most to gain from leverage, thus the Generation phase. Please try to remember, try to keep it somewhat real (or at least mathematically astute)
Here's something interesting, and feel free to tell me if I am going astray here (particularly as I might add, Hugh may find this content disturbing).
In Stats NZ Infoshare are monthly consents by type number, value and floor area. So we can pick specifically new dwellings and divide the value by floor area and get an approximate value per square metre. The we can go to the consumer price index and get the inflation index value and divide by that to get an inflation adjusted value per square metre. This is what that graph (since the 1970s) looks like.
https://www.dropbox.com/s/eidmve5p0mwjxek/InflationDwellsqrmetre.png
Now, a couple of observations:
- It is difficult to blame the 2002 Local Government Act that was mostly implemented in 2004 for cost increases, was going up from 2001.
- After the GFC fallout which I shouldn't officially call a depression, the inflation adjusted costs per metre have been increasing fairly steadily since 2011, so this term's government effects are if anything the opposite of what should be happening.
[added in edit]:
- Actually does anyone know why building costs (as measured by inflaiton adjusted square metre consents) were so high in late 74/ early 75 then came down? It is after the early 70s oil shock and before the one at the end of the 70s (so I will rule that out). Inflation was in the process of going up, but it wasn't a high or low point in the cycle. I ask, because this was the last time that costs per square metre were comparable with what they are in the past year.
CPI is useless as an index. The Building Construction Inputs index of the PPI (ref SQNEE1100) might be nearer the mark, but all indices have their quirks and discontinuities as materials, techniques, the average size of houses, the average quality of fit-out and thus the 'basket' being measured change over time. Just think: how many houses in 2002 were built with an installed heat pump or Cat5 cabling? Plus PPI Inputs (Costs) need also to be gauged against PPI Outputs (prices reached for production, which will include margins, interest and overheads) - another statistical mare's nest.
In short - your mileage may vary......and your conclusions may thereby be suspect.
That's why the Median Multiple is better, as it concentrates upon base data of market price which can be more easily ascertained, and statistically verified household income series.
I thought about using the PPI (other other construction related indexes) and in the end figured the CPI was useful for comparing buidling houses to a reasonably common measure of things that are not houses. So compared to other stuff, a house built in the mid 70s cost more than a house built in the 1990s (while the later should have been kitted out better) and about the same as a newly built house of the same size.
I think comparing the consent's cost per square metre to the PPI construction tells a slightly different story- the degree to which the value of the dwelling is being governed by things within the PPI series vs this not counted by it, because if it was the same ratio through time you would see no change. Now, the building subdivision only tracks back a few years, but for that time follows the line of the general construction index reasonably closely, so I think it is reasonable to use the general construction entry as a proxy for building over a longer period (which gets us back to the early 1990s).
https://www.dropbox.com/s/vl2k1nkody1yy9r/constructAdjustedValSqrM.png
Interpreting the Construction Index adjusted Consent Value per Square Metre, I would say that against a baseline period of 1994-2000, there was a brief period in 2003-2004 when costs not measured by things in the Construction Index were playing more of a role than normal. Conversely, from 2007 to the present, things measured by the Construction Index played a more significant role in setting the house price than they did in the 1990s.
I am not sure if Amberley qualifies as near Christchurch (35 min to the airport on a good run) or Rangiora (15 to 20 min) or of decent population - 2500 people, but many sections are priced under $150K
http://www.realestate.co.nz/residential/section/canterbury/hurunui/amberley
Look at what support they get for bus/train runs. Service 4-6 times a day IIRC.
That makes them a sattelite town. Not the type of thing where you can go to dinner, show, shopping, work, just by using city services.
Anyway does Chch count as a real city any more, now it doesn't have a Cathedral!?
In Alain Bertaud’s “Cities as Labour Markets” body of work he argues that cities are primarily labour markets, that the statisical evidence is you can reach the majority of the market in under 1 hour.
That would put Amberley at the outer limits of Greater Christchurch. This being the second biggest urban concentration at aprox 450,000 in NZ despite the earthquakes.
Admittedly Amberley is poorly served by public transport and the road link is congested too. But people do commute to the Greater Christchurch labour market in under 1 hour.
I consider the need for private owned conveyence to break the 1hour rule (in cities). Towns yes, boundary areas yes. But for consider what lies "within" the city proper, no.
The evidence to this being that the transport owner has to invest and maintain the vehicle, when in-metro they have to store it and then travel to their destination. Proving that there is an entire external process to utilise the city services (including rental of employers' site to make earnings) for even minor usage. That externality breaking the wall between "in city services" and "visiting the city for services".
That's why I could places like Amberley as "satelite" because for most people they would need to travel by vehicle to a bus or train station, then disembark to commute. Or if parking were available they could spend the fuel and wear&tear and time to drive to their destination. An option that isn't unreasonable if the destination is on the near side of the city, but if the destination is on the other side of the city, then looking at the city services (serving internal city) don't line up with the two peripheral areas. Imagine a trip from "home" (Amberley) to "work site" (Rangiora). Clearly that places at least one outside the city's serviced area. Reverse the trip and the other site is equally "not city". Yet for town planning purposes, population and services density does not justify frequent (<2hr) continual 5am-11pm runs between those points, thus putting them "outside" the city proper.
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