This due to increasingly tougher financial conditions
Residential consent issuance has continued its downward spiral as increasingly tougher financial conditions drag down construction activity.
Satish Ranchhod (pictured above), Westpac senior economist, said residential consent issuance is expected to decline over the year ahead, with the construction industry continuing to signal that fewer new projects are coming to the market.
“The number of new dwelling consents fell 9% in February, with 3,200 new dwellings consented over the month,” Ranchhod said. “That’s a 30% drop in monthly consent issuance since the peak seen in March 2022. The drop has been spread across both standalone houses and multi-unit developments.
“Over the past year, 48,000 new developments were consented. While that is still high compared to history, it has been trending down from the peak of over 50,000 that we saw early last year.”
He pointed to the increasingly tighter financial conditions as the key factors weighing on construction activity.
“Build costs have skyrocketed over the past year,” Ranchhod said. “Interest rates have risen to their highest levels in more than a decade. And house prices have fallen by 17% across the country. Those factors mean that prospective buyers are reluctant to purchase off the plans. And developers are increasingly hesitant to bring new projects to market.
“Given those conditions, we expect consent issuance will continue to drop over the months ahead. And as the current pipeline of projects are completed, those conditions will see construction activity trending down over the next few years.”
The Westpac economist said reconstruction in the wake of the recent wild weather events that devastated central North Island will boost building activity over the coming year.
“However, that will only slow the overall pace of decline in residential building – we’re still looking at tough financial conditions in the homebuilding sector over the next few years,” Ranchhod said.
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