There is a strong pipeline of work for the residential building sector over the near term. Consents for new dwellings totalled over 32,000 for the past 12 months. This figure is close to the highest recorded since early 2004. Moreover, the latest figure represents an increase of more than 5% over year-earlier levels.
Noticeably, the increases over the latest year are spread unevenly across the regions, with consents across the North Island soaring 28%, while those in the South Island actually declining an average 2.5%. Undoubtedly, the surge in house building over the last few years has been driven by that in Auckland, but the spread to other regions has been erratic and patchy. Nevertheless, it is now clear that the surge has spread further than Auckland and its close neighbours.
Strongest percentage growth over the latest year was recorded in Marlborough (34%), followed closely by Hawke’s Bay (33%), Wellington (27%), Gisborne (20%), Manawatū-Whanganui (14%), and Auckland (13%). Amongst those areas recording a lower number of consents than the previous year were West Coast (-13%), Taranaki (-12%), Canterbury (-9%), and Bay of Plenty (-7%).
Consequently, we see consent levels across the country at, or above, 15-year highs. The pattern over the years is informative, with the original surge in early 2012 being concentrated in Christchurch and Auckland. Thereafter, with the post-quakes residential re-build of Christchurch tailing off a couple of years later, Auckland began to dominate the house-building upswing but was quickly joined by the rest of New Zealand.
Similarly instructive is the lengthy time taken to restore activity to pre-GFC highs. The slump in house building over the mid-to-late-2000s, culminating in the precipitous decline in 2008/09, resulted in 3 to 4 years of extremely low numbers for housing construction. Despite a strong upswing from 2012/13, it has still taken another 5 years to reach previous peaks. This illustrates the depth and extent of reduced house building activity over that 2007-2012 period. And this further reinforces that much of the latest upswing remains in the form of catching-up on the several years of minimal activity.
Looking at the more recent numbers, an apparent resurgence is forming. In particular, the latest 3 months are more than 10% above year-earlier levels, with strong double-digit lifts in Wellington, Auckland, Hawke’s Bay, Manawatū-Whanganui, Tasman, and Marlborough.
Consequently, the pipeline of work for house builders remains strong. The largest risk remains the capacity of the sector to maintain activity at these levels (or even lift to higher levels). The lengthy period of low activity reduced the appetite for training and also contributed to the exodus of skilled personnel. While the consequent skills supply constraints may be papered over through short-term immigration options, the appetite for longer-term investment in skills training remains moot.