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Residential building consents

New dwelling consents gaining downwards momentum

30 Nov 2022

Sabrina Swerdloff

Our take on the latest Residential building consents (Wed 30 Nov 2022)

Annual dwelling consents

50,252

As of October 2022

Standalone house consents down 27%pa from October 2021

Townhouse consents up 17% from October 2021

The key numbers...

There were 3,568 new residential consents in October, down 12% from October 2021. This decline was the largest monthly fall since 2016, excluding the COVID-19 lockdown in April 2020. Standalone house consents totalled 1,594, 27% lower than in October 2021. The 9.3% decline in seasonally adjusted house consents from September is the steepest monthly decline since 2011, apart from the 2020 lockdown.
Standalone house consents have been clearly trending downwards since early 2022, and with attached dwellings continuing to grow strongly throughout most of the last year, standalone houses are comprising an smaller proportion of residential consents.
Townhouse consents in October were up 17% from a year ago, which is a stronger result than the -5.4% and +6.2% results recorded in August and September respectively. However, growth remains well down from the 51% growth averaged over the year to July 2022.
October was a weak month for apartment consents, with 92 fewer apartments consented than in October 2021. Most of the drop occurred in Wellington, with 73 fewer apartments than a year ago. Of the 239 apartments consented last month, 98% were in Auckland.

House consents falling, non-houses flattening

Consents by dwelling type

4409

...and our reaction

Consent numbers are starting to respond to declining house prices and weaker demand levels in the housing market. The largest declines in October 2022 have come from Bay of Plenty, which consented 162 fewer dwellings than in October 2021, and Wellington, with 107 fewer dwellings consented.
The continued decline in standalone housing consents comes off the back of rising interest rates and building costs and difficult affordability conditions. Although townhouse consent growth was more positive in October, we have heard widespread anecdotes of developers starting to shy away from new projects. We expect numbers to continue softening as house prices trend downwards and rising interest rates undermine the affordability of new builds.
Retirement consents have also shown signs of softening over the past two months, with some operators waiting to push ahead with new projects until there is more capacity in the industry and cost pressures have eased.
New dwelling consent numbers are expected to decline sharply across New Zealand over the next two years. The backlog of work and capacity constraints might slow the rate of completion and keep work put in place at high levels for longer than consents, but there is an increasing risk of consented projects being cancelled given weaker demand conditions.

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