Wellington Property Investors' Association

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04-10-2010

Home building passes low point

Landlords.co.nz

Home building construction looks to have passed the cycle's low point and fundamentals for an upswing for the remainder of 2010 and 2011 are still in place, according to the Department of Building and Housing.

By Maddy Milicich

According to its latest quarterly Building and Construction Outlook, which was launched in March this year, residential consents have been trending up over the past three quarters - up 21% from the same time last year - and the industry remains optimistic of continued growth.

However, the slow but steady growth seen since 2009 looks to be flattening out somewhat and the improvement seems to be more a rebound rather than momentum-driven.

DBH says that although indicators supporting a rise in construction activity remain positive, such as an improving outlook for employment and a projected shortage of housing due to population growth, it says overall they weakened slightly during the September quarter.

Growth has been held back recently by declining net migration, tighter bank lending and the sluggish pace of domestic economic recovery, the report says.

Waikato investor Nancy Caiger says she has noticed improved building activity in new subdivisions in Hamilton, where she herself is finishing off a new build rental property.

"Maybe people have been getting in before GST increases?"

The residential alterations and additions market has remained steady, partially offsetting the decline in new building work, the report says.

Looking forward, this sector should experience sustained growth over the next four to five years, with forecasts of $5 billion-plus in remedial work required for leaky homes.

Non-residential consents have continued to weaken and conditions in the sector are predicted to get worse before they get better, with an upturn not expected until at least late 2011.

There is also concern that the improvement in the residential sector may not hold up enough to offset the decline in the non-residential sector.

While a number of large commercial building and infrastructure projects are in the pipeline for 2012, the outlook for the remainder of this year and into next is bleak.

Source: Landlords.co.nz

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