Contradictory signals on housing

House price expectations hit a record, dwelling consents fell in June and Building and Housing Minister Nick Smith is encouraged by a report which forecasts unprecedented construction activity. Business editor Dene Mackenzie unravels the latest data.

It should come as no surprise that house price expectations have hit a record high, with the ASB reporting a net 65% of respondents to its housing confidence survey expecting house prices to increase.

A net 11% of respondents see now as a bad time to buy a house. Sentiment dropped in the three months ending July, on par with the July quarter last year, which was the weakest reading since October 2007.

House prices, especially in Auckland and Christchurch, had increased dramatically, which would be dampening sentiment, ASB chief economist Nick Tuffley said.

''Unsurprisingly, sentiment remains poorest in Auckland and Christchurch where the markets are tight and affordability has become more stretched in recent years.

"Further, we may be beginning to see signs the new housing measures, due on October 1, are also negatively affecting sentiment in Auckland.''

Looking through the report results, it was easy to see a trend.

In Auckland, a net -27% believed it was a good time to buy a house but the figure was 0% for the rest of the North Island.

In Canterbury, a net -17% believed it was a good time to buy a house but only -3% believed the same for the rest of the South Island.

A net 71% believed Auckland house prices would rise in the year ahead, up from 63% last quarter but starting to ease by the end of July.

Mr Tuffley said the first signs were emerging of respondents taking into account the likely impacts of the new housing restrictions, particularly for investors, coming into effect on October 1.

Investors need a 30% deposit to buy a house from October 1, although already having property is seen as a way of circumventing the rules.

In the rest of the South Island, which includes Otago and Southland, 61% believed prices would rise.

But at a time when Auckland's housing shortage was being described as a crisis, overall building consent figures provided a gloomy snapshot.

On Thursday, Statistics New Zealand figures showed residential dwelling consents were down 4.1% in June on the previous month and were down 4.5% on the year ended June.

Stand-alone house consents were down 4% in the month and 4.5% in the year but non-residential consents were up 17% from the previous 12-month period.

Mr Tuffley said the weak headline in June masked a ''relatively'' positive report.

Canterbury consents appeared to be stabilising at high levels after recording falls earlier in the year.

Auckland consents continued to lift but the rate of growth was still inadequate relative to population growth.

Construction activity in New Zealand was likely to peak in 2015 and no longer be a strong contributor to economic growth although construction demand would remain at elevated levels, he said.

Building and Housing Minister Nick Smith released the National Construction Pipeline Report during the week which said the total value of building and construction was forecast to top $200 billion over the next six years and peak at an all-time high of about $37 billion in 2016.

The report forecast the strongest sustained level of growth in the building and construction industry in 40 years and confirmed New Zealanders were building more than ever before.

''I am particularly encouraged by this report's projections that 80,000 new homes will be built in Auckland for the forecast period of six years to the end of 2020.''

The new projections overshadowed the 30,000 homes built in the past six years and signalled a massive building boom, Dr Smith said.

The report was significantly more optimistic about the future rate of homes being built in Auckland compared with last year's report.

Last year's report projected 52,500 new houses over the years 2015 to 2019 while the new report projected 67,700 over the same period.

The report identified three significant trends.

There had been a shift in the pattern of growth in residential construction activity between Auckland and Christchurch.

Canterbury house consents had reached a plateau and were forecast to drop from 7750 this year to 3000 by 2020, while Auckland continued to increase.

The second trend was a shift to more apartments and attached homes, with those making up 33% of new builds over the next five years compared with 16% over the past five years.

The third trend was a shift to smaller new homes.

Dr Smith said the report pointed to a golden era for New Zealand's building and construction industry.

However, Certified Builders chief executive Grant Florence, while welcoming the report, expressed concern about industry skill shortages in light of growth in construction activity.

There was a risk of complacency in the context of the Licensed Building Practitioner (LBP) scheme, which was designed to give consumers confidence the licensed tradespeople they employed met standards and performed building work competently.

Without adequate strengthening of the scheme, Certified Builders was concerned the quality of building work could be compromised, he said.

 

 


At a glance

 

A new report is ambitiously forecasting 80,000 new houses will be built in New Zealand in the six years to the end of 2020 - compared with only 30,000 in the previous six years. But industry observers say a shortage of skilled labour could hurt consumers. In the meantime, a shift in where building consents are being issued is emerging.


 

 

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