Positive news for builders

THE building sector continues to firm, with a stabilising housing market adding some peace of mind for tradesmen, Master Builders' Federation chief executive Warwick Quinn says.

Statistics New Zealand figures showed building consents for August rose 2.8 per cent, a long way below the 11 per cent rise seen in July.

Mr Quinn said the figures were positive, but were coming off a low base, after the building industry hit bottom six months ago. "For 18 months it was just drop on drop on drop, but that has stopped. We're not sure how long we will be running along the bottom."

The value of residential projects fell 3.6 per cent on August 2008 at $440 million, but had been increasing since March.

Wellington and Auckland saw the largest dips from a year ago, down nearly 40 per cent and 21 per cent respectively, while Waikato and Manawatu-Wanganui had increases from last August.

UBS senior economist Robin Clements said the August numbers were moderate and would not affect the Reserve Bank's perception of the sector's influence on inflation. Housing would be less of a drag on GDP in the latter half of the year but any increase would be small too, he said.

Mr Quinn said about 15,000 consents had been granted in the year so far, and would grow in the next few months, with a further pickup next year. A large number of influences were supporting the growth, including interest rates remaining relatively low, positive immigration, builders' prices, a stabilising real estate market and a clearing of surplus houses.

Mr Quinn said people were starting to have some faith in house prices and so would be more confident to build something knowing the value would not drop immediately.

Equally, land prices had come down and settled.

Builders were pricing competitively to win work and no longer had massive waiting lists for work, so people could get work done promptly, Mr Quinn said. "We think there is a window of about 18 months where people can get a very competitive price; once it starts to take off again, perhaps this time next year, the window will close."

Builders had retrained to shift into areas that were busier than residential building, which would mean a slow shift back if housing projects bounced back, he said.

Commercial consents rose 6 per cent in value, boosted by several large indoor sports projects. Office and industrial projects were the largest decreases.

"The commercial sector has been quite strong given all the money the Government has been putting into schools and hospitals and other parties into stadiums," Mr Quinn said.

Goldman Sachs J B Were analyst Bernard Doyle said the commercial sector seemed to be flagging from recent highs, but would only fall mildly, lagging the domestic economic recovery.