What economic recovery?

Jennian Homes is calling on the government to take a stronger leadership role to restore consumer confidence in new home building. The current system is not working.

“The indicators are no longer pointing to an upswing, and consumers are still holding back,” says Jennian Homes director Richard Carver. “They need more confidence to get them over the line.

“The government’s recent attack on residential property investors, GST and ACC increases will only undermine consumer confidence further. Not to mention, in my opinion, the flawed early introduction of the Emissions Trading Scheme, which will force higher petrol and electricity prices on all New Zealanders, at a time when we are all being told that we must save more.”

Economic forecasts for the residential construction industry remain cautiously optimistic, despite the slow pace of the recovery. “In light of the poor residential consent data for May, the economic forecasts appear too optimistic,” Mr Carver says. “Economists will undoubtedly change their views, as usual, just like the shifting sands.”

The consent trend is off a historically low base, making percentage increases look impressive. While it still appears to continue upwards, the building consent figures for May, published yesterday, show a significant fall back from April’s rise.

“This is a major concern and clearly shows that the recent 0.25% increase in the OCR was premature and unwarranted. The associated appreciation in the NZ dollar of more than 5 cents will only make the recovery longer and harder for all Kiwis – especially primary exporters, the backbone of our economy.

“Globally, things are looking more uncertain by the day and we may be heading into a double dip recession.”

The Department of Building and Housing’s outlook for the June quarter highlights indicators which support a rise in construction activity, such as an improving outlook for employment and a projected shortage in housing due to population growth.

Mr Carver says: “Slowing immigration and a grossly optimistic view on pent up new housing demand by many of New Zealand’s leading economists will prove these assumptions to be flawed.

“The predicted housing shortage, at this stage, appears to be just a myth, as every departing Kiwi, mostly heading for Australia, will tell you – along with 20-plus-year-olds who are more than happy staying at home with their overburdened parents.

“Most people in non-essential jobs still lack confidence in job retention; recent layoffs attest to this.”

Once again Mr Carver says the October GST increase, coupled with the impact of the Emissions Trading Scheme, will see household expenses rise. “That may continue to keep consent numbers in check for a while yet. Everywhere you look costs are increasing, mainly driven by the government sector.

“The government needs to step up to restore consumer confidence in new home building and renovations, and to restore industry viability.

“First steps must be taken to address access to finance for building companies and potential home builders, and more changes need to be made to make the building consent process quicker, less costly, and easier. No one will be immune from more builder-related failures in the months ahead.

“This year the government introduced single plan multiple consenting for group home builders but that doesn’t go far enough. We need to see further reduction in compliance costs and regulations at local council level to alleviate the burden on the construction industry and the consumer.

“The recent multiple consenting changes are too expensive and flawed and will not be widely adopted because of New Zealanders’ desire to influence the design of their home. We are not Coronation Street and have plenty of land to keep the Kiwi dream of living in a home you’ve ‘designed’ yourself alive and well.”

Mr Carver says other issues also need to be addressed, such as access to quality land and the cost of land.

“In short, the residential construction industry is not in great shape.”

ENDS

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