Dwelling consents on the rebound

The number of building consents issued for apartments rebounded strongly in November, hiding a fall in consents issued for other dwellings.

Statistics New Zealand figures showed dwelling consents in November were up 11.1% in the month and 36.7% on November last year. Excluding apartments, dwelling consents fell 0.5% over the month.

There was a strong rebound in Auckland dwelling consents following weak results in recent months.

Statistics NZ highlighted the number of apartments consented in Auckland in November which made up 268 of the 492 apartments consented nationwide.

Excluding apartments, 79 more dwellings were consented in Auckland.

ASB economist Christina Leung said the result was ''very encouraging'' given signs over much of the second half of 2013 that house building demand might have slowed in Auckland.

''Business surveys indicate a rebound in confidence and activity outlook in the construction sector over November and December, particularly in regards to residential construction.''

The Reserve Bank announced in December it would exempt new residential construction loans from the loan-to-value (LVR) restrictions. The exemption covered loans to finance the construction of a new house only and did not apply to the purchase of a newly-built house.

Ms Leung said there were anecdotes from building companies the restrictions on high LVR lending was discouraging house building demand.

Households were worried a top-up in mortgage borrowing would be required, should unexpected additional building costs be incurred once the project had started.

The Reserve Bank acknowledged the problem in its earlier analysis that reduced construction of new houses might be an unintended consequence of LVR restrictions.

''The exemption is likely to support a continued improvement in house building demand in Auckland over the coming months, given the acute housing supply shortages in the region.''

Statistics NZ estimated earthquake-related consents totalled $40 million in November, of which $36 million was for residential building work. The remaining $4 million was for non-residential building work.

Ms Leung said consents for earthquake-related work had been steady over the second half of last year, indicating the Canterbury rebuild remained on track Work identified as earthquake-related captured only work to repair or rebuild on affected sites and did not include replacement houses built on different sites.

''We expect the earthquake rebuild in Canterbury and stronger house building demand in Auckland will drive construction growth over the coming years.

''The extent to which this increase in construction activity will flow through to capacity pressures will be a key factor the Reserve Bank pays close attention to.

''We expect that as construction activity gathers further momentum, and underpins New Zealand economic growth, this will prompt the Reserve Bank to lift the official cash rate in March,'' she said.

The OCR is currently 2.5%, the same as Australia. The Reserve Bank of Australia is likely to cut its cash rate further this year while the New Zealand central bank is expected to move upwards by 2% in the next 18 months.

In Australia, the number of home-building permits fell in November, a second month of falls that increased concern over the strength of a rebound in housing construction.

Approvals to build or renovate houses and apartments fell 1.5% from October, the Australian Bureau of Statistics said yesterday. Approvals earlier fell 1.6% in October from September.

Housing was seen as one of the few areas of strength in the Australian economy as a long resources boom cooled. The central bank has cut rates eight times since late 2011 in a bid to spur activity in areas such as retail and housing that have led previous expansions.

 

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