House building hits rock bottom

Fairfax Media

URBAN FALL: House prices continued to slip in January, with the national average value down 8.3 percent compared to the previous year.

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House building activity hit its lowest ever recorded level in January.

Statistics New Zealand said that just 812 dwelling units, including apartments, were authorised for construction during the month. That's the lowest number since SNZ started recording the figures in 1965.

On a seasonally adjusted basis, the number of approvals plunged 8.2 percent in the month.

The figures, which point to future building activity, have been falling substantially since the housing boom started running out of steam in mid-2007.

Today's latest figures will be likely to put further pressure on job numbers in the building industry. Economists have previously suggested there are many thousands too many people in the industry now relative to the amount of activity.

ASB chief economist Nick Tuffley said the level of consents indicated that actual residential construction activity was "likely to take another large double-digit quarterly drop in early 2009 after a probable substantial drop in late 2008".

"The strong drag in this sector is one reason why we expect very weak GDP outcomes in the last quarter of 2008 and first quarter of 2009, of around -0.7 percent and -1 percent respectively."

The "substantial weakness" in the residential sector reinforced ASB's view that the Reserve Bank will cut official interest rates from 3.5 percent to 2.5 percent when it next reviews the rates on March 12, Tuffley said.

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