Stats NZ figures show there were 46,924 new dwellings consented in the year ended March. Photo: 123RF
A downturn in housing consents and skyrocketing operating costs means more construction businesses are feeling the financial pinch.
New Stats NZ figures show the number of new homes consented in the year ended March was down 7.9 percent year-on-year, with 46,924 new dwellings consented.
Consents were down in all regions except Tasman, Marlborough, and the West Coast compared to March last year.
Auckland had the most new homes consented, at just over 20,000, followed by Canterbury at 8171.
Construction and property statistics manager Michael Heslop said there were 9719 new homes consented in the March 2023 quarter, down 21 percent compared to the March 2022 quarter.
"The number of homes consented in the month of March 2023 was down from March 2022, which was the highest month on record," he said.
"But the number of homes consented in March 2023 is still the third highest for a March month."
Westpac senior economist Satish Ranchhod said the trend in new home building was clearly softening and consents were expected to continue their downward trend over the year ahead.
At the same time, construction firms were facing ever-increasing financial conditions, he said.
"Operating costs for construction firms have skyrocketed over the past year, rising by around 12 percent," he said.
"On top of that, interest rates have risen to their highest levels in more than a decade.
"At the same time, existing house prices have tumbled, dropping by 17 percent across the country.
"Those factors mean that prospective buyers are reluctant to purchase off the plan, while developers are increasingly hesitant to bring new projects to market."
Ranchhod said the sector had previously been able to pass on higher costs with strong demand, but that was no longer the case.
With plenty of projects in the pipeline, he expected construction activity would remain firm over the course of 2023, with reconstruction following the recent storms providing some support.
"However, as the existing pipeline of projects is completed, the above conditions mean that construction activity is set to turn down over the coming years," he said.