|
 Building Trends |
15 Jul 08 |
|
 |
New Zealand Institute of Economic Research (Inc) |
NZ Trends in Property and Construction
April 2008
The high levels of
consents of recent quarters seem to be starting to show in building
activity. Building work put in place rose 7.3% in the December 2007 quarter, following
increases of 3.1% and 4.9% in the previous two quarters. This was the second
busiest ever quarter, second only to September 2005.
Together, these
resulted in an upturn in total building activity for the year.
Building work put in place in the year to December 2007 totalled $5.0
billion, 2.6% more than in the year to September 2007. This is still 1.0% less
than in the year to December 2006, but only 3.1% below the peak of the March
2006 year. In the latest
quarter, the education buildings sector saw the greatest increase in building
activity (38%), followed by the commercial buildings sector (15%) and the
miscellaneous buildings sector1 (13%). Only in the hotels and boarding houses sector and hospitals and
nursing homes sector did building activity decline this quarter (by 33% and 10%
respectively). For education buildings and commercial buildings, it was the
busiest ever quarter and, despite the drop in hospitals and nursing homes, it
was the second busiest ever quarter for this sector. For hotels and boarding
houses, however, it was the lowest quarter since March 2004.
In annual terms all sectors except hotels and boarding houses saw
more building activity in the December 2007 year than in the September 2007
year. All but the hotels and boarding houses sector and education buildings
sector saw more building activity in the December 2007 year than in the
December 2006 year. Relative to the December 2006 year, growth was greatest in
the hospitals and nursing homes sector (13%) and commercial buildings sector
(6.9%) and the greatest declines were seen in the hotels and boarding houses
sector (31%) and education buildings sector (14%).
Building activity
outlook
Economic growth
The New Zealand
economy grew strongly in the December 2007 quarter, attributed largely to dairy
and oil exports, non-residential construction and, to a lesser extent, buoyant
private consumption. The outlook is for a moderate slowdown in 2008, as
domestic demand and business investment weaken. The rise in dairy payout has
provided a significant boost in the March 2008 year, but the recent drought
will reduce agricultural output. The housing market continues to cool, perhaps
more rapidly than some expectations. Externally, the world economy is also
suffering weakened growth prospects and heightened uncertainty and caution in
financial markets. NZIER forecasts New Zealand’s real GDP to grow by
2.7% in the year to March 2008 and 2.5% in the year to March 2009, before
strengthening to 3.1% in the March 2012 year.
Non-residential
building investment leapt 16.4% in the December 2007 quarter, after declining
since early 2006, perhaps, at last, in catch up with the ongoing high levels of
consents. NZIER’s March 2008 Quarterly Survey of Business Opinion recorded a
decline in the number of firms planning to invest more in buildings in the short
run, but many in the industry remain positive about work opportunities in the
medium to long run such as upgrading Auckland airport and gearing up for the
2011 Rugby World Cup.
In contrast, data
indicate that the housing boom is over. Although recovering somewhat in mid
2007, residential building investment has been declining for most of the past
two years. House construction is forecast to grow modestly until mid 2008,
before a gradual decline due to high interest rates and falling immigration.
Some labour and other construction resources freed by the slowdown in the
residential building sector have shifted to the non-residential building
sector, providing some easing in its capacity constraints.
“Other construction”
investment is forecast to keep growing as spending on infrastructure, primarily
roading, continues.
Interest rates
The Consumer Price
Index rose 3.2% in the December 2007 year, exceeding the Reserve Bank’s target
range of 1% to 3%. In response, the Reserve Bank left the Official Cash Rate
unchanged in its March 2008 review, at 8.25% since July 2007. Although slowing,
the economy is still operating near capacity. Capacity utilisation has risen to
its equal highest rate since records began in 1961 and unemployment has reached
a 21 year low. Commodity prices are still strong and the terms of trade are at
a 33 year high. The Reserve Bank continues to be concerned about rising food
and energy prices in the short run and the longer run inflationary risks of
announced government spending, personal tax cuts and introduction of the
greenhouse gas emissions trading scheme.
Inflation is
expected to remain above the Reserve Bank’s target range for most of 2008. |
|
|
 |
|
|
|
|
© 2008, 2009 Tauranga.co.nz Limited. All Rights Reserved.
