Unrelenting growth in house building, construction costs continue
The cost of building a house has gone up about 6 per cent in the last year as Auckland's building boom has further to run.
New data from Statistics New Zealand shows building activity grew a modest 1.4 per cent for the September quarter but was up a "whopping" 16 per cent for the year, according to Westpac economist Satish Ranchhod.
Resident building volumes are now double what they were at a low point five years ago.
Ranchhod estimated the cost of residential building had grown at their fastest pace in almost a decade.
Prices had started rising with the Christchurch rebuild and picked up pace as Auckland became "the centre of gravity of construction".
"And it's probably going to continue because Auckland's at a much earlier stage in its construction cycle than Canterbury is now, and it's a much larger work stream.
"Combine that with the Kaikoura earthquakes and a very large pipeline of construction work and those costs are going to be feeling some upward pressure for some time."
In terms of value, construction work is up 22 per cent on a year ago and, for the first quarter ever, topped $5 billion.
Almost all regions enjoyed the upsurge, with Auckland generating the lion's share of work, increasing 32 per cent in value to $1.9b.
The rest of the North Island, rest of the South Island and Waikato all increased by 27 per cent and Wellington workloads grew 21 per cent.
Canterbury's order book lost some steam, although it still rose 4.3 per cent and contributed $1.2b of the workload.
Matt Henry of Forsyth Barr said the outlook for the construction sector was still very strong.
"We continue to expect New Zealand construction activity will, at least, remain at healthy levels for the foreseeable future. The principal issue facing the industry is meeting demand as supply constraints increasingly bite."
BNZ chief economist Tony Alexander said in his latest column this week that people were misled if they thought house prices were going to crash.
"In this country we make it so difficult for anyone to build anything other than a kennel for their dog that growing supply is very difficult, with that difficulty assisted by shortages of builders, shortages of materials, and now a shortage of finance.
"There won't be a price crash, but as noted in July, we have entered the end-game for this housing cycle, and if the LVR tightening undertaken in July does prove to have only a temporary impact, then there will be another tightening before the middle of this year."