The construction industry will face a “nosedive into deepening malaise” unless something more is done to kick-start it, an economist says.
The warning by Goldman Sachs JBWere analyst Shamubeel Eaqub comes after building consent figures showed the number of residential housing consents hit new lows in November last year.
Statistics New Zealand said only 1168 units were authorised during the month — the lowest monthly total since January 1992.
When apartment consents were taken out of the figures the number of new houses authorised fell to 1052 units, the lowest level since Statistics New Zealand began monitoring consents in January 1990.
The year to November saw total consents falling 26% to 19,068 — the lowest annual total since the April 1994 year.
The trend for the number of new housing consents has now dropped 48% since its peak in June 2007.
Mr Eaqub says the data suggested there would be a major decline in construction activity in the first half of the year, with much of the weakness in the residential housing sector.
“While falling interest rates are a positive, they have not yet been fully passed on to borrowers with sufficient ease to catalyse a recovery in our view.”
Mr Eaqub says more needs to be done. “The construction sector and the economy more generally desperately need a kick-start to pull out of the current nosedive into deepening malaise.”
UBS senior economist Robin Clements says it was possible the housing sector would continue to have a negative impact on growth in the 2009 year.
Not all doom and gloom
But not all were down on the sector.
ASB economist Jane Turner says it is not surprising to see consents at a weak level given the economic environment, but she believed it would pick up.
“The medium-term outlook for construction should be more positive, with ongoing population growth likely to provide a base for construction activity.”
The value of residential consents for the November year was down 19% to $6.338 billion. In 14 of New Zealand’s 16 regions the number of consents fell, with Auckland dropping the most by numbers.
Auckland was down 189 units or 37%, followed by Canterbury, down 181 units or 49%, and then the Waikato dropping 138 units or 45%.
Tasman and the West Coast were the only regions not to fall with authorised units up 5 and 1 respectively.
But the picture was better for non-residential consents. They were up 6.5% to $4.472 billion, although the November month was down 0.8% on November 2007.
Mr Eaqub says falling business profitability is having an impact on new investment in non-residential initiatives, but infrastructure should be strongly supported by a pre-committed pipeline of work.