The highest number of new homes consented was in Auckland and Canterbury. Photo: RNZ / Nate McKinnon
Activity in the residential building sector is falling, with the annual number of homes consented down 11 percent on a year ago and returning to levels last seen in 2021.
Stats NZ figures showed 45,159 new homes were consented in the year to May.
"The latest annual number was down from the record high of 51,015 new homes consented in the year ended May 2022, but is at a similar level to the same period in 2021," construction and property statistics manager Michael Heslop said.
The number of new townhouses, flats and units fell for the first time since late 2012 and 3.2 percent in a year, as more retirement village units and apartments were built.
Auckland and Canterbury had the highest number of new homes consented.
Westpac senior economist Satish Ranchhod said the data was weaker than expected and he expected the downturn to continue.
He pointed to tougher financial conditions in the construction sector, such as house price falls of 17 percent nationally, soaring operating costs for construction firms and interest rates reaching their highest levels in more than a decade.
"The combination of those factors mean that prospective buyers are reluctant to purchase off the plan, while developers are increasingly hesitant to bring new projects to market," he said.
"Consistent with that, those in the industry continue to report low levels of forward orders."
Although builders had enough work in the pipeline to keep them busy for the rest of the year, Ranchhod expected a downturn in the sector.
"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.
"A key area to watch will be house prices which, after falling sharply over the past year, have started to find a base in recent months.
"If that stabilisation in prices continues - or if prices begin pushing higher - it could go a long way to supporting sentiment in the building sector, as well as encouraging new developments."