Residential, commercial building activity surges

Building activity has risen 16% for the quarter to March, driven by work in Canterbury and Auckland.

While the residential building activity for the quarter to March was up 15.1% at an almost 12-year high, the sustainability of the latest gains by the building sector is being questioned.

Westpac senior economist Michael Gordon said there was strong volume growth in both residential activity, up by 15.1%, and commercial construction, up 17.2%, according to data from Statistics New Zealand yesterday.

''The gains were shared across the country. While the Canterbury region was up 25% by value, the rest of the country saw a 17% increase in value,'' he said.

Residential value grew by 17% to $2.36 billion and commercial value was up 18% to $1.4 billion.

Mr Gordon said it had been noted earlier that the level of building activity was falling behind, relative to the pipeline of consented work, and was due for a catch-up at some point.

''However, the increase in the March quarter was well beyond what we would have reasonably expected,'' he said.

Mr Gordon said, conversely, it may be ''a big ask'' for the industry to have sustained that pace during the second quarter, to June, suggesting there may be some negative risk to the outlook for second quarter gross domestic product data.

ASB economist Christina Leung said overall construction activity ''surged'' for the first quarter, reflecting strong increases across both residential and commercial construction.

''Very strong house-building activity in Canterbury and Auckland led the surge in residential construction,'' she said.

Ms Leung expected the Canterbury rebuild and stronger house-building demand in Auckland would remain the ''key drivers'' of construction growth during the next two years.

''Recent inflation indicators point to capacity pressures remaining contained in the building sector, despite the surge in activity,'' she said.

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