Is New Zealand heading into a new building boom?


The Canterbury rebuild and a rebound in the Auckland housing sector is expected to help drive the building sector to a new peak by year ending March 2016, says leading industry analyst and economic forecaster,

BIS Shrapnel.

According to the company’s Building and Construction in New Zealand 2014-2019 report, also contributing to the increase in activity level is remediation work on leaky homes and schools as well as earthquake-risk buildings.

Total building (residential and non-residential) authorisation value over the next five years to 2019 is forecast to reach a new record high in 2016 to more than NZ$10 billion in constant terms.

This level of activity would exceed the historically high levels recorded over the boom period of 2004-2008.

“We expect Auckland to experience strong growth in residential construction over most of the next five years,” said report author and BIS Shrapnel senior project manager, Adeline Wong.

“The number of dwelling consents in Auckland is expected to increase from 4,760 in 2012/13 to an estimated 6,350 in 2013/14 and then to around 10,000 by 2017/18.

Wong said building activity should be supported by a number of factors.

“Relatively low levels of new residential building in recent years have left a housing shortage, although 2013 Census data indicates this may be less than previously thought,” said Wong.

“Population growth including through immigration, firm economic growth, and relatively low – but rising – interest rates should also support the demand for residential dwellings.

“Auckland’s high house prices are likely to drive first home buyers to settle for cheaper apartment prices in high density living in the inner city. The high density housing sector may thus present an upside over the forecast period – which is in line with Auckland’s Unitary Plan that calls for up to 70 per cent of new dwellings to be built within the current city boundary.”

Over the next five years, BIS Shrapnel expects the New Zealand housing market to be underpinned by reasonably strong net overseas immigration and mostly favourable economic growth.

Dwelling activity over the outlook period will also be boosted by strong activity in alterations and additions to dwellings, and this will drive total dwelling authorisation value to record highs – resulting in an annual average of NZ$5.85 billion in constant terms.

While Christchurch reconstruction will provide a major boost to the non-residential building sector over the next five years, BIS Shrapnel also expects a pick-up in new building and refurbishment activity in the warehouse, factory and office building sectors in the North Island as leasing activity gathers pace in response to domestic and global economic growth over the next 2-3 years.

Annual average commercial and industrial building authorisations are forecast to reach an estimated NZ$2.39 billion in constant terms – or 14 per cent higher than the level during the 2004-2008 boom years.

“The non-residential building sector over the next five years may get an extra lift from potentially wider earthquake strengthening work in office buildings and schools in Wellington in particular,” said Wong. “However, there is also a downside risk to our forecasts in that the timing and scale of Christchurch reconstruction, and also seismic work in Wellington ,may not be as expected.

“Some owners of quake-damaged and earthquake-risk properties may not commit to redevelopment in the short term, which would impact the overall outlook.”

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