Construction still surging, but housing market activity slow

Tuesday, 29 April 2014, 10:40 am
Press Release: ASB Bank

Construction still surging, but housing market activity slows

• The ASB Cantometer hit a new high of 1.5 in April.
• Construction sector activity continues to accelerate.
• But the Canterbury housing market has eased slightly since the RBNZ started tightening policy in late 2013.

The ASB Cantometer index edged upwards to a new high of 1.5 in April, driven once again by stronger indicators of construction activity.
“Residential consent issuance continues to ramp up on a trend basis with the three-month average of consents hitting a new high in February,” says ASB Chief Economist Nick Tuffley.

Meanwhile, the housing market has eased somewhat over the last six months.
“Recently-released data from QV confirmed that house price inflation slowed over the fourth quarter of 2013. Prices in Christchurch rose by a seasonally-adjusted 1.4% over the quarter, down from a 2.8% increase over the previous three months,” says Mr Tuffley. “However that quarterly house price growth did outstrip the national average.”

“Recent sales data have shown a slowdown in sales volumes, both in Canterbury and nationally,” Mr Tuffley says. “This is mainly a result of the RBNZ’s restrictions on high-LVR mortgage lending. But the low number of homes coming onto the market will keep upwards pressure on prices over 2014.”

Outlook
The continued improvement in the Cantometer Index reflects broadening economic activity, says Mr Tuffley.

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“The pace of recent consent issuance provides reassurance that construction activity will continue to grow over the coming months. At the same time, this renewed confidence is flowing through to other sectors of the regional economy, boosting spending and employment.”

About the Cantometer

The Cantometer is designed to summarise activity in Canterbury. The study takes a range of publically available regional economic data, which are 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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