tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Friday, November 1st, 10:39AM

News

rss
Latest Headlines

Building consents sink

A truly spectacular crash to fresh lows is being predicted for the construction industry by ANZ as building consents sank 2.3% in June compared to just 0.5% in May.

Wednesday, August 3rd 2022, 10:45AM

by Sally Lindsay

ANZ chief economist Sharon Zollner says the outlook for house-building has hit a brick wall and data suggests building consents may have a lot further to fall yet.

June’s drop in consents was the third monthly decline in a row on a seasonally adjusted basis. The June figures were just over 11.5% lower than March.

The last time building consents fell three months in a row was beween November 2016 and January 2017.

Over the past year, 50,500 new dwellings have been consented.

This points to a large pipeline of work over the next year to 18 months. However, Fletcher Building says at that level, consents are running 20-30% ahead of the industry’s capacity to build.  The ideal capacity for building is 35,000 houses a year.

Westpac senior economist Satish Ranchhod says with shortages of materials and labour resulting in widespread delays, planned work is taking longer to complete. Combined, those conditions don’t point to a sharp fall in building activity in the near term.

The biggest materials shortage is plasterboard, but 100 containers of the product are on their way after the dominant supplier Fletcher Building, with a 96% market share, could not supply enough.

Twelve importers have arranged the plasterboard shipments with a range of products able to be used instead of Fletcher Building’s Gib.

Conditions in the construction sector have changed, says Ranchhod and a peak in the construction cycle is fast approaching, if it’s not already here.

“The big change has been in the financial incentives for developers. House prices are falling, and prospective buyers are increasingly hesitant about purchasing homes off the plans,” he says.

At the same time, build costs have skyrocketed.  Property research firm Core Logic's latest Cordell Construction Cost Index (CCCI has risen 7.7% - the swiftest rise in a decade. The pressure is not expected to come off for at least another couple of quarters.

Alongside building rising building costs is staff shortages. Ranchhod says the resulting squeeze on profit margins has meant developers are growing increasingly nervous about bringing new projects to market. That pressure has been compounded by the rise in borrowing costs.

At the same time, there has been a big change in population trends compared to pre-pandemic levels. Through much of the past decade, population growth far outpaced home building, and shortages of housing developed in many regions (especially Auckland).

Now, net migration has plummeted and is set to remain low for some time, says Ranchhod. “With a downturn in population growth at the same time that home building has charged higher, the shortages that developed in recent years are now being rapidly eroded. Even allowing for a gradual lift in migration over the coming years, consents are now running well ahead of what’s needed to keep up with population changes.

“To date, there has been only a moderate cooling in the number of new projects being consented. However, there can be long lags from the time a project is initiated and when a consent is issued.”

Ranchhod says  with financial conditions becoming increasingly tight, he expects to see consents continuing to go down over the coming months. “That signals a pullback from the elevated levels of building activity over the coming year. However, with a significant pipeline of projects already in train, this is likely to be an easing back, rather than a collapse.”

The construction industry is in a precarious position. More than 18% of company failures in the past year were building companies going under mainly because of labour and material shortages and increasing costs.

Since the start of this year, 92 construction companies have been put in liquidation.

Tags: building

« Bond service to get massive upgradeResidential sector not working as well as it could be »

Special Offers

Comments from our readers

No comments yet

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 ▼5.65 ▼5.55 ▼5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 ▼6.39 ▼6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - ▼6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 ▼5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.79 6.49 6.49
TSB Special 7.89 5.99 5.69 5.69
Unity ▼7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.50 ▼6.19 ▼5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.17 5.79 5.69

Last updated: 30 October 2024 9:36am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com