The housing sector is expected to remain under considerable pressure despite the dramatic drop in interest rates, ASB economist Jane Turner says.
Commenting on the latest Statistics New Zealand (SNZ) building statistics, Ms Turner said house prices continued to fall, reducing incentives to build.
"In addition, rising unemployment, slowing income growth and weak levels of household confidence will also weigh against housing construction," she said.
The data showed that the slump in house building continued for a fifth consecutive quarter in the three months to December and the decline was accelerating. In the latest quarter, the seasonally adjusted volume of residential building work fell 13.4%, the largest fall in eight years. The volume was now 32.5% lower than in the September 2007 quarter, the last time it rose, SNZ said.
The seasonally adjusted volume of residential building work put in place in the December quarter was the lowest since March 2002.
SNZ said the trend indicated the rate of decline in the volume of residential building work was increasing, having fallen by nearly a third in the latest five quarters. Seasonally adjusted, the value of residential building work, in current prices, fell 13.4% in the December quarter.
For the 2008 calendar year, the unadjusted value of residential building work put in place was $7.32 billion, down 14.2% on the previous year. The volume of non-residential building work rose 1.6% in the December quarter, seasonally adjusted, following a 5.2% rise in the previous quarter. The adjusted value of non-residential building work, in current prices, rose 1.7% in the December quarter.
For the 2008 calendar year, the unadjusted $5.22 billion of non-residential building work put in place was up $188 million, or 3.7%, from the previous year. The value of miscellaneous non-residential buildings rose $182 million, or 12.7%, to $1.61 billion for the year, with education buildings up $104 million to $618 million, and commercial buildings up $41 million to $1.69 billion.
Accommodation buildings were down $101 million to $413 million; hospitals and nursing homes were down $11 million to $442 million; and factories and industrial buildings dropped $26 million to $447 million.
Seasonally adjusted, the volume of all building work fell 6.5% in the December quarter, the fourth successive quarterly fall, while the value, in current prices, fell 7%.
For 2008, the unadjusted value of all building work put in place was $12.5 billion, down 7.5% from the previous year. Ms Turner said the building work put in place was a key piece of data to firm up the GDP forecast.
"Today's number was slightly better than we had expected.
"However, we continue to expect a large decline in GDP over the fourth quarter 2008 and the first quarter 2009."
The ASB preliminary forecast for fourth-quarter GDP sat at -1%. Next Monday's economic survey of manufacturing would provide the last piece of data before GDP figures came out at the end of the month, Ms Turner said.
