Building work falls less than expected

Tuesday 9th June 2009

New Zealand’s total building work fell by a smaller-than-expected 0.7% in the first quarter, though the decline is set to accelerate in the latest three months following a slump in construction permits.

The total value of building work put in place fell to a seasonally adjusted $2.897 billion in the three months ended March 31, from $2.918 billion the previous quarter, according to Statistics New Zealand.

Bank of New Zealand economists predicted a slump of 8% in the first quarter. New residential building consents rose 11% in April though they are 58% lower than in the same month of 2008.

“There’s a big disconnect” between the work numbers and new building consents issued, said Cameron Bagrie, chief economist at ANZ National Bank. The weakness from fewer new work permits in the first three months of the year “will flow into the second quarter” for the value of building work data, he said.

Recent data releases from Quotable Value, the Real Estate Institute, Barfoot & Thompson, and Harcourts New Zealand noted a pick-up in the property market. The ANZ National Bank’s eight gauges of the sector predict it is “showing signs of life” as rising migration and dwindling supply create an over-demand for new homes.

Bagrie predicts “the recession will end this quarter”, but the recovery will be marked by a slow “crawl along the bottom.”

The key release this week will be the Reserve Bank’s monetary policy statement, with economists divided over whether Governor Alan Bollard will hold the official cash rate at 2.5%, or slash rates a further 25 basis points.

Bollard is expected to reiterate his warning that interest rates would remain at a depressed level until late next year, as the cost of long-term borrowing increases despite the Governor’s attempt to jawbone rates down in April.

Residential building work fell 0.4% to a seasonally adjusted $1.558 billion in the first three months of 2009 for its sixth consecutive quarterly decline. The 18-month period has seen the value of residential building work slump by more than a third.

Non-residential building decreased 1% in the first quarter to $1.339 billion, and is down 1.2% from the same period a year prior.

Businesswire.co.nz

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