Cantometer: Construction Lifting - Housing Shortages

Wednesday, 27 March 2013, 10:16 am
Press Release: ASB Bank

ASB Cantometer Shows Construction Lifting But Housing Shortages Persist

• ASB Cantometer eased over March but remains at elevated levels.
• Housing shortages remain a constraint in the region despite the initial increase in residential building activity.

The ASB Cantometer index edged lower over March, falling back to 0.5 from 0.6 in February. The decline is largely led by lower non-residential building consents. However, these can be particularly volatile due to the lumpy nature of projects.

ASB Chief Economist Nick Tuffley says, “The level of non-residential consents remains very elevated and indicates strong demand ahead in the construction pipeline. In addition, continued lifts in residential building consents provided some offset the decline in non-residential consents.”

New house listings continue to decline in Canterbury, exacerbating existing supply constraints. Mr Tuffley notes that, “The recent pick-up in residential building activity has yet to provide a meaningful increase in the housing supply.”

There remains a steady increase in permanent and long-term migration. The January lift is consistent with the trend in net migration for the rest of the country.
“We expect skill shortages in the construction sector and offshore recruitment to underpin a greater population growth in Canterbury over the coming year,” says Mr Tuffley.

Outlook

“Canterbury reconstruction activity will underpin the nationwide lift in residential construction over the coming year. There are tentative signs of construction activity spilling over to increased demand throughout the broader regional economy, such as retail spending,” says Mr Tuffley.

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“The RBNZ will balance the Canterbury construction-led lift in activity and growing Auckland housing market pressures against the impact of the elevated NZD. We continue to expect the RBNZ will leave the OCR unchanged until March 2014,” concludes Mr Tuffley.

Full release with graphs etc… (PDF File) Cantometer

About the Cantometer

The Cantometer is designed to summarise activity in Canterbury. The study takes a range of publically available regional economic data, which is standardised and aggregated into a summary measure. The index has been rebased to zero in June 2010 (the end of the quarter immediately preceding the first earthquake) such that a positive number represents activity being above pre-earthquake levels.

Along with the aggregate Cantometer index, there are five sub categories: Construction, Housing, Employment, Consumer spending and Miscellaneous*.

These sub-indices will provide some insight into which sectors are driving the rebuild activity at a given point in time.

For most activity the data reference the level of activity. However, when incorporating wages and house prices into the index we believe levels are less informative. Instead the index uses prices relative to the rest of the country.

An increase in relative prices is a signal for resources to be reallocated to the Canterbury region.

The historical Cantometer series represented on the charts is a simple average of the complete set of data for each month.

*The miscellaneous category includes electricity, car registrations, guest nights and permanent and long-term net migration. A common factor driving these areas will be population growth, and we expect all these indicators to increase as the rebuild gathers momentum.

ENDS

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