Building costs have risen sharply over the last year. Photo: 123rf
The number of new residential building consents has fallen for a third straight month.
Stats NZ said the number for February was 9 percent down on the previous month and 29 percent lower compared to the same month a year ago.
The annual number of new homes consented fell 3.3 percent, with 48,257 consented for the year ended February 2023.
However, the number of annual consents remained high compared to historic levels.
More than half of the new consents for the year were for multi-unit homes, up 15 percent from the year ended February 2022.
Otago and Canterbury led the overall fall in consents. Both regions saw falls of 47 and 46 percent respectively from a year ago.
The regions were followed by Wellington, down 35 percent and Auckland, down 21 percent.
The only regions that did not see a fall in consents from a year ago were Bay of Plenty and Marlborough.
Stats NZ said Cyclone Gabrielle may have caused some disruption to consents being issued in affected regions.
Westpac senior economist Satish Ranchhod said tighter financial conditions have become an increasing drag on construction activity.
He said building costs have skyrocketed over the past year, while interest rates were at their highest level in more than a decade.
On top of that house prices have fallen 17 percent, he said.
"Those factors mean that prospective buyers are reluctant to purchase off the plans. And developers are increasingly hesitant to bring new projects to market," Ranchhod said.
He expected the number of consents issued to continue to fall.
"As the current pipeline of projects are completed, those conditions will see construction activity trending down over the next few years."
Ranchhod said reconstruction following the recent severe weather in the North Island would only slow the overall pace of decline in residential building.