NZ Building Consents - January 2001

Data Flash (New Zealand)

Key points The number of new dwelling consents issued increased 5.5% mom in January following a 8.9% mom decline in December.

The number of dwellings consents issued was around 13% lower than a year earlier. However, the value of consents issued was just 0.3% lower, consistent with anecdotes pointing to relative buoyancy at the mid-to-upper end of the market.

Non-residential building consents with a value of $191m were issued in January. The value of non-residential consents issued in the three months to January was 2% higher than a year earlier (the latter, a period of strong consents activity).

Commentary The pick-up in dwelling consents issued in January was to be expected following a very weak December, and is consistent with anecdotal evidence pointing to an improvement in housing market activity in the New Year. As the first chart shows, the cycle in building levels typically lags that of house sales. The improvement in house sales over the past couple of months suggests that a pick-up in building consents can be expected over coming months.

Yesterday's NBNZ survey tells a similar story, with residential investment intentions suggesting that a significant rebound could be in prospect over coming months. Our latest Economic Forecasts, to be published tomorrow, have allowed for a more modest upswing than indicated by the NBNZ survey. Our bullishness on this sector is tempered by continued weak population growth due to high net migration outflows. But improving levels of consumer sentiment and lower mortgage interest rates are positive factors for the housing market, and our view here could prove unduly pessimistic. We'll watch the data with interest over coming months. A stronger housing market would reinforce our view that the economy is capable of achieving growth at or above trend levels, notwithstanding the current weakness in the US.

Non-residential construction consents remains at robust levels, consistent with widespread industry expectations of a lift in activity over the coming year. This reflects falling office and industrial vacancy rates, planned retail developments, and Government projects.

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