Data Flash (NZ) Building Consents - January 2002
Data Flash (New Zealand)
Building Consents - January 2002
Result: The number of dwelling consents fell 0.9% mom. While 12.6% higher than a year earlier, the level of issuance in
January is little different from the average over the past decade or so.
Surprise?: Yes. Following last month's sharp fall, a strong rebound had been expected.
Implication for markets: Marginal at this stage. However, if significant growth is not recorded over coming months the
RBNZ's November MPS view on the housing market is likely to prove far too optimistic.
Commentary
Over the past two months the buoyant level of activity in the market for existing homes has failed to spill over to
building activity with the usual lag. At this stage we remain optimistic that the upward trend in dwellings consents
will resume in February, consistent with a range of anecdotal and official indicators pointing to upward momentum in the
housing market.
In its November Monetary Policy Statement, the RBNZ forecast annual average growth in residential building activity of
22% for the year to March 2003. If this forecast is to be realised, building consents will need to show very substantial
growth over coming months. Even allowing for a cumulative 18% rise in the level of consents over the next 4 months, our
current expectation is for building activity to rise a more modest 15% (assisted by a rise in the average value of
consents issued).
Going forward, the key issue for monetary policy will be the impact of increasing activity on house prices and
construction costs. A strong pick up in house prices would act to raise household's perception of wealth, and thus
sustain stronger-than-expected growth in consumer spending. At the margin, this would contribute to a rise in pressures
on core inflation. Rising construction costs feed directly into the CPI.
So far the pricing indicators have remained reasonably subdued. This may reflect the fact that despite house sales and
building consents having rising well off their lows, they remain nowhere near the historic highs. Indeed, the level of
building consents issued in January is little different from the average over the past decade or so.
Key points
The number of new dwelling consents issued decreased 0.9% mom in January following a 7.5% decline in December.
The number of dwelling consents issued in January was 12.6% higher than a year earlier but 0.5% lower than the average
level since 1990.
Non-residential building consents with a value of $223m were issued in January. The three-month running total was 6.0%
lower than a year earlier.
Darren Gibbs, Senior Economist
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