How far will building consent numbers fall?

With just 329 new residential dwellings consented this month, this is the lowest level of new building consent activity since July 2020, where there were only 317 new dwellings consented across all three Councils.

This trend is mirrored across the whole of New Zealand, and I expect numbers to continue to decline for some time to come.

Why is this happening?

Much of the current construction activity is based on “sales” that occurred 12 or 18 months ago.

Remember way back then…Interest rates were low, capital growth was on a trajectory to the moon and there was money everywhere…

But today, it’s a different market.

Interest rates are high (and expected to rise further), capital growth is zero (if you are lucky) and money is harder to find than rocking horse s#*t.

Unfortunately, things aren’t going to improve any time soon.

To be fair (and brutally honest), the writing has been on the wall (and in my Reports) for the past year.

The building sector and the economy don’t just change overnight…it’s a slow rolling wave, with plenty of indicators to give (those who are paying attention) a warning of a change in market activity.

Back in November 2021 (just 15 months ago), the market was crazy, everyone thought that they were a property developer and builders were buying up land like they weren’t making any more (well, this might not have been a bad idea in retrospect, as little did we know what was coming…with respect to the GCP).

However, the market has turned, and the residential construction sector is set for an extended period of decline.

Of course, this comes after an extended period of increasing activity, and many builders and developers made hay while the sun shone.

But that’s the building industry, boom then bust…but rest assured, this is not permanent…the market will slow down, we will under build, the economy will improve and so will the construction market.

Just don’t count on this happening any time soon.

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