Record number of new homes get green light, but construction expected to ease: Economist

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New homes are still being granted at levels never seen before, but high costs, falling property prices and low net migration put a question mark over how many homes will continue to be built.

A record 51,015 new homes received consent in the year to May, up 17% or nearly 10,000 homes from the previous year, Stats NZ said.

The annual record of 40,025 new homes granted was from February 1974 to March 2021, said Michael Heslop, head of construction and real estate statistics.

“Since March 2021, we have continued to see record levels of new consent housing, driven by growth in multi-unit housing.”

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There were 26,479 multi-unit homes granted in the year ended May, up 36% from the previous year, while 24,536 single-family homes were granted, up 2.1% .

“This is the third month in a row that the annual number of new multi-unit consent homes has exceeded new free-standing homes,” Heslop said.

Multi-unit homes include townhouses, apartments, retirement village units, and apartments.

Canterbury was the region with the biggest increase in new homes granted during the year, up 34% to 8,529, followed by Otago (up 30% to 2,540), Southland (up 27 % to 482) and Wellington (up 21% to 3899). ).

New homes are being taken in at previously record highs, but the number of actual builds is expected to decline, according to a Westpac economist.

Alden Williams / Stuff

New homes are being taken in at previously record highs, but the number of actual builds is expected to decline, according to a Westpac economist.

Auckland saw a 17% increase to 21,688 households, and Waikato saw a 12% increase to 5,149 households.

However, the number of consents issued decreased for the month. The seasonally adjusted number of new homes granted in May was 4,146, down 0.5% from April, which in turn was down 8.6% in March.

Compared to May 2021, seasonally adjusted monthly consents increased by 2.9%.

The monthly number of new homes allowed could fluctuate due to large apartment and townhouse projects, Heslop said.

Westpac senior economist Satish Ranchhod said consent issuance had already stabilized, having hovered near current levels for about a year once monthly fluctuations smoothed out.

A peak in the construction cycle was rapidly approaching, if not already here, Ranchhod said.

“With a large number of projects already underway, we still expect construction activity to remain strong for some time. But with biting capacity constraints and mounting financial pressures, scope for further increases is limited.

“And over time, as economic activity more generally cools and existing housing shortages erode, we expect to see home building activity slow from recent highs.”

Population growth has outstripped housing construction for much of the past decade, and many areas have experienced housing shortages. Now that is reversing, with net migration plummeting and likely to remain low for some, he said.

“The combination of slowing population growth at the same time as housing construction has increased means that the shortages that have developed in recent years are now rapidly eroding.

“Furthermore, even taking into account a gradual increase in migration over the next few years, the provision of consent is now well ahead of what is needed to keep up with demographic changes.”

Real estate developers and builders are seeing their operating margins tighten. Home prices were falling and the economic outlook was uncertain, and pressure was mounting with material and labor shortages and soaring costs.

Gareth Kiernan, chief forecaster at Infometrics, said townhouses were a key driver of continued consent growth.

The monthly total of 2,135 consents for townhouses means that this segment has shown annual growth greater than 50% over the past four months.

“The high number of consents for townhouses reflects the highly unaffordable nature of housing, with potential buyers reducing their buying aspirations and accepting smaller homes on smaller sections,” he said.

For the month, the townhouse issue in Auckland was 1,329, more than 500 above May 2021 and breaking the previous record of 1,282 in August 2021.

The Wellington area had a monthly total of 239 consented townhouses in May, also a record, Kiernan said.

There were 10 housing units per 1,000 people across the country for the year, down from 8.5 a year earlier, but below the record 13.4 for the year ended December 1973.

For the year ending May, non-residential building permits totaled $8.9 billion, up 12% from a year earlier.

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