16-year high in dwelling consents pushes Fletcher Building up

By NZPA

Friday 31st January 2003

A 16-year high in new housing permits reinforced sentiment about the building boom and sent Fletcher Building shares to a near five-year high.

Fletcher Building peaked at $3.55 today -- its highest level since May 1998. It closed a cent down at $3.54 .

Statistics New Zealand data released today shows the number of new dwellings consents for 2002 at the highest level since 1976.

The department said 27,208 new units were approved for the December year, up 32 percent on 2001.

New apartments were also steaming ahead -- consents were issued for 5610 apartments, almost double the number recorded the previous year.

Much of the residential building, particularly in apartments, was occurring in Auckland, which jumped 50 percent from 2001 and claimed 61 percent of 2002's annual increase.

Analysts were divided on whether the building boom could continue at the same pace this year.

On a monthly basis, consents in Auckland rose while the rest of the country fell, noted Deutsche Bank NZ's chief economist, Ulf Schoefisch.

"That reflects the fact the most of the strong net inflow of migrants which is driving the overall level of activity impacts the Auckland region."

And since net migration had levelled out over the last 12 months, he thought the building frenzy would fall into line, slowing over 2003.

However, BNZ chief economist Tony Alexander said the trend boded well for one more year of strong building growth.

"Dwelling supply will eventually catch up with demand and surpass it. But given low interest rates, a firm labour market, investor demand and net migrant gains, we don't see this happening until 2004," Mr Alexander said.

Dr Schoefisch said the implication for monetary policy was that while consent levels might be at their peak, actual construction activity would remain quite strong over the first half of the year, "suggesting that a monetary easing before June is not very likely".

Apart from Auckland, other regions showed significant upturns in housing during 2002, including Canterbury (32.5 percent), Bay of Plenty (25.7 percent), Otago (23.8 percent), Waikato (nearly 14.9 percent), and Wellington (8.1 percent).

Mr Alexander said the data was "fundamentally strong, and even houses are kicking up whereas to date the big gains have been for apartments".

During 2002, housing was boosted by low interest rates, strong population growth, demand from the foreign education sector and investors looking for an alternative to poorly performing overseas equities.

Population growth has risen from 0.7 percent in 2001 to 1.5 percent.

Non-residential construction was "okay but not especially strong", up 1.3 percent for the year.

It was underpinned by farmers doing a one in 20-year upgrading of farm infrastructure, a growing number of tourists and a need for more processing facilities in primary production.

On a monthly basis, December's new dwellings figures rose a seasonally adjusted 21.6 percent on the previous month, while non-residential buildings dropped by 3 percent.

The total value of consents for all buildings in December was $660 million, including $212 million in non-residential buildings.

Total for the December year was $7.769 billion, up $1.2 billion or 18 percent on 2001.

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