Risks continue for building recovery

Residential building consent figures rose in February, but some economists are warning of risks to a continued recovery in the industry.

Publishing the data today, Statistics New Zealand (SNZ) said seasonally adjusted housing consents, excluding apartments, rose in February to the highest level since May 2008.

There was a 10 percent rise in the adjusted, apartments-excluded, figure in February, with the increase a lower 5.9 percent when the volatile apartment category is included.

Unadjusted figures show 1362 consents, excluding apartments, issued in February, up 57.3 percent from a year earlier. Only 13 new apartment units were authorised, the lowest monthly number since 1995.

The 1375 total dwelling unit consents issued in February is up 29.8 percent from a year earlier.

The value of residential building consents in February was $484 million, up 35 percent from February 2009.

For non-residential buildings, the value of consents fell 17 percent to $317m, SNZ said.

The value of consents for all buildings was up 8.2 percent from a year earlier to $801m in February.

ANZ bank said today's figures followed a sequence of highly volatile readings for consents.

Indicators for the issuing of residential consents in the coming months, such as house sales, highlighted the risk the recovery was not being maintained, ANZ said.

At the same time, the rise in non-residential building consent values was from exceptionally low levels. Much of the lift in non-residential consents was for education and health buildings, with an improvement in commercial construction less marked.

"We continue to question the durability of non-residential construction in the absence of an environment for higher government spending,'' ANZ said.

Deutsche Bank chief economist Darren Gibbs said he expected a substantial rise in construction this year and in 2011, boosted by mortgage rates that were likely to remain low by average historical levels, and by historically strong rates of population growth.

He thought the low number of consents for apartments in February illustrated a lack of activity in the developer and investor market, in particular.

Goldman Sachs JBWere economist Philip Borkin said consents were running at 16,300 on a three-month annualised basis.

If his firm's forecasts of 16,800 consents for the 2010 financial year to be hit, the results for February would need to be maintained for the following four months, Mr Borkin said.

A 9.8 percent month-on-month rise, and 40 percent year-on-year, in the floor area of residential consents suggested that, while sluggish, real residential construction should continue to rebound during the first half of 2010 from depressed levels.

For the year ended February, the total value of consents issued for residential buildings was $5.3 billion, down $471m or 8.2 percent from the previous year.

Non-residential consents for the year were worth $4.32b, down $266m or 5.8 percent, while for all building consents the value was $9.62b, down $737m or 7.1 percent.

- NZPA