With just under 2,900 new dwellings approved in April, this was down two per cent on the previous month. Over the past year building consents have fallen 23 per cent to 35,401, signalling a downturn in construction over the year ahead.

It’s a result of the tougher conditions in New Zealand’s building sector, with big increases in building and financing costs over the past few years as well as weakness in the housing market, which is weighing on prices for newly built homes, says Satish Ranchhod, Westpac’s senior economist.  

“For now, building activity has been easing back gradually, as many operators are working through the pipeline of projects that accumulated in recent years. However, as that work is completed, we expect a sizeable fall in construction activity,” he says.  

The good news is the downturn in consent numbers looks like it’s finding a base.

Flattening off

Consents for standalone houses (about 40 per cent of the total) have held around current levels for more than six months. “We’re also seeing tentative signs the downtrend in the multi-unit space – including townhouses and other medium density developments – is flattening off.” 

In April 1,354 stand-alone houses were consented, along with 1,296 townhouses, flats and units,178 retirement village units and 98 apartments.

While the number of consents being issued may be finding a floor, a material pickup is still a long way off, Ranchhod says.

Developers are likely to remain cautious about bringing projects to market until interest rates fall and the housing market recovers. Last week, the RBNZ in its OCR review said borrowing costs may need to remain high for longer than previously assumed. 

Looking across regions, weakness has been widespread. Consent numbers in Auckland are down 27 per cent, Wellington down 30 per cent, and Canterbury down 16 per cent.