Wellington Property Investors' Association

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15-10-2010

Pick-up in residential property market expected next year

Fletcher Building expects the residential property market to pick-up next year when rebuilding begins in Canterbury and the government's response to ‘leaky homes' comes into effect.

Chief executive Jonathan Ling told analysts that residential rebuilding in Christchurch is expected to accelerate in the second half of 2011 after the 7.1 magnitude earthquake last month caused some $4 billion worth of damage. Fletcher has won the contract to manage the Earthquake Commission's project management office for the rebuilding, though Ling said it probably won't have a significant impact on first-half trading.

The late pick-up from rebuilding Canterbury will combine with the government's ‘leaky home' programme which will see central government put up $1 billion over the next five years, local government offer another $1 billion, and homeowners left to foot the rest of the bill.

Ling said building alterations and additions have been falling for the past two years and the ‘leaky home' remediation is expected to help turn this around.

New Zealand's residential building consents sank 18% in August as households continue to focus on repaying debt as opposed to sinking more money into the homes. The deleveraging has kept the property market under pressure this year with house sales near the trough in 2008 when the global financial was at its worst, after returning expatriates and new migrants underpinned demand through 2009.

Ling said residential property market could improve on the economic recovery lifting consumer confidence and more strength in net migration flows. Personal tax cuts and a low-interest rate environment are also factors underpinning a turnaround in the market, though there will probably be regional variances, with North Island provincial areas overbuilt, he said.

The shares rose 0.4% to $8.41 and have gained 2.4% this year.

(Businesswire)

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