By Paul McBeth
Aug. 30 (BusinessDesk) - Economists expect construction work will stay elevated over the next year or two as the number of new residential building permits remain at 45-year highs and may get a tailwind from cheaper finance.
Some 35,472 residential building consents were issued in the year ended July 31, up 8 percent from a year earlier and the most since February 1974 when a record 40,025 permits were signed off, Stats NZ figures show. Those permits cover 5.8 million square metres at a value of $13.21 billion, up 2.7 percent and 9 percent respectively.
Meanwhile, non-residential building consents were up 11 percent on both a floor area and value basis at 3.53 million square metres and $7.57 billion.
"We believe house-building activity is likely close to a peak, but we expect residential construction activity to remain at high levels over 2019 in order for housing supply to make up the shortfall which has emerged in recent years," ASB Bank economist Jane Turner said in a note.
"Meanwhile, there are no signs of a slowdown in commercial construction despite weak business confidence levels seen over the year."
Fletcher Building chief executive Ross Taylor this month said the domestic construction outlook for the June 2020 financial year was very similar to 2019, although he noted residential permits might ease.
Construction firms expect to scale back their investment in both residential and commercial building over the coming year and share other sectors' gloom about the state of the economy.
Turner also noted commercial building issuance was strong with high demand for new accommodation.
"Furthermore, we expect the housing market to benefit from a pick up later this year, underpinned by lower mortgage rates, which should provide additional support to house building demand," she said.
Westpac New Zealand economist Satish Ranchhod agreed that the latest data indicated building work will remain elevated for some time, although he anticipates the pace of growth will slow.
"In part, that’s due to the continuing wind back of post-earthquake reconstruction activity which is providing a cap on nationwide building levels," he said.
Stats NZ figures showed seasonally adjusted dwelling consents were down 1.3 percent, although new house consents were up 4.8 percent. On an adjusted basis, new residential dwelling permits jumped 24 percent to 3,420 in July from the same month a year earlier, of which houses were up 21 percent at 2,101.
The value of non-residential work rose 27 percent to $658 million on an 8 percent increase in consented floor area to 321,000 square metres.