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Building approvals continue to decline

Building approvals continue to decline as housing market crumbles

(See attached file: NZ_bldapps_27feb08.pdf [full release with charts])

Total building approvals bounced just 3.3%m/m in January after a 3.9% decline in December. The number of building approvals (excluding apartments) rebounded a mere 5%m/m in January after a sizable fall of 11.8% in December. Looking through the noise of the notoriously volatile month-on-month movements, the underlying trend in building approvals continues to head south. The trend in approvals (excluding apartments) is now down 7.6%oya, from -5.9% in December (chart).

The pendulum has swung from a seller's market to a buyer's market, and all the street signs are reading 'buyer's beware'. As a result, the supply of housing will continue to dry up in the short term as investors remain sceptical and concerned about the outlook for the housing market over the next few years. As seen in last week's ASB survey of housing confidence, only a small margin of 1% net respondents expect house prices to rise over the next year, compared to 12% previously. The survey is a good indicator of activity over the next two to three months, and suggests activity will be very subdued indeed. Furthermore, we have seen nothing but weak housing market data from the REINZ and QVNZ.

New Zealand's housing market is crumbling under the weight of higher interest rates and reduced net-permanent migration. JPMorgan expects house prices to contract in 2008, and remain subdued throughout 2009.


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