House consents hit five-year high

05:27, May 30 2013

A 43-per cent jump in building consents last month compared with the previous April was well above economists' forecasts.

Approval for 1755 houses and apartments was issued, the highest monthly number for five years, Statistics New Zealand said.

A quarter of the consents were for Auckland, and Shamubeel Eaqub, of the New Zealand Institute of Economic Research, said it appeared builders were starting to respond to Auckland's housing needs.

"We're not far away from where they were in 2007, [but] we're still a long way back from where it was in the early 2000s, and certainly we need to keep building new homes to make up for the pause we had during the recession," Eaqub said.

Releasing updated economic forecasts yesterday, NZIER said sharply rising house prices in Auckland "may be speculative" and have the Reserve Bank worried. It noted that house price inflation was far higher than rent rises, suggesting houses were being bought as an investment, not because of a demand for homes.

This could lead to the Auckland house price bubble bursting, with economic implications for the whole country, NZIER said.

Economists said the jump in consents, up a seasonally adjusted 19 per cent compared with March, was affected by the volatile apartment market and by the timing of Easter.

Westpac economist Michael Gordon was expecting a 13 per cent increase, although the figures were "probably understated for March and overstated for April".

Nevertheless, "we estimate that the underlying trend is up".

Non-residential building consents also strengthened last month, totalling $308 million. They were down from $364m in March but up 35 per cent on a year ago.

March's figures were boosted by two large prison contracts worth $101m, which meant the picture of underlying non-residential activity looked more positive, Infometrics economist Gareth Kiernan said.

Good regional growth had been recorded over the past two months in Auckland (up 56 per cent from 2012), Wellington (up 39 per cent) and Nelson (up 277 per cent), but the work in Canterbury was still only slightly higher than levels through the second half of last year.

Given that Canterbury's work had yet to occur, however, he took the data to mean that the "patchy" growth of non-residential building work was becoming more broadbased.

Building consents compared with April last year:

❏ Wellington up 159 to 238 (including 82 city apartments and 63 retirement village units on the Kapiti Coast).

❏ Canterbury up 115 to 397.

❏ Auckland up 71 to 431.

❏ Otago up 62 to 115 (including 40 retirement village units in Dunedin).

Contact Catherine Harris
Business reporter