Building consents in New Zealand fall in March, construction sector to support domestic momentum for a while

New Zealand’s number of residential dwelling permits dropped seasonally adjusted 9.8% m/m last month. March’s data reversed the gains recorded in February. Most of the month to month volatility seen is due to fluctuations in the multi-dwelling component, noted ANZ. The multi-dwelling component fell 22.6% sa last month, as compared with the gain of 27.9% sa in February. The number of permits for “houses” also fluctuated, although modestly. It declined 4.1% in March as compared with growth of 3.9% in the prior month.

Stabilization in trend issuance is seen, according to ANZ. The peak seems to have happened by the end of 2015. Drops in the trend for multi-dwellings were 0.8% q/q and for houses 2.2% q/q in Q1. Trend in the new dwellings permitted in Auckland is at 2015 highs. At 9,340 dwellings, it is not enough to attain current housing needs.

The declining trend in permit extended in Canterbury, while the trend in Wellington and remainder of North Island continues to be on an upward line. This points towards the strengthening of property market, said ANZ. A total of 27,789 residential consents were applied for in the 12 months to March. This was the highest in one decade.

Rise in cost of construction indicated certain signs of slowing. The value of residential permits per square metre is estimated to be increasing at a pace of 11.4% y/y, according to ANZ. The non-residential consents’ value grew 12.1% sa, mainly because of the rise in the number of permits for boarding houses, hostels, prisons and also cultural, social and religious buildings. The construction sector is expected to help support domestic momentum for some time, noted ANZ.

“However, escalating costs and capacity constraints are a significant risk and attitudes will need to shift to ensure what is built today will be suitable for future population needs”, added ANZ.