House consents find floor, attached still falling

There were 2,795 new dwellings consented in February 2024, 15% more than January 2024 on a seasonally adjusted basis. Despite stronger consenting in February, consents eased to 36,276 on an annual basis, although the year-end decline slowed to 25%, from 26% in the year to January 2024.

House consents appear to have found a floor, with annual house consents settling around 15,500 over the past three months, and with monthly seasonally adjusted house consents steady over the past eight months.

Non-house consents continue to ease, although February wasn’t as weak as previous months. A total of 1,498 non-house dwellings were consented in February 2024, which was 10%pa fewer than February 2023, and much better than the 25% decline in the year to February 2024. Declines in townhouses have moderated to a 17% annual drop. Apartments and retirement units continue to fall sharply, down 49% and 45% respectively.

Gisborne and Hawke’s Bay were the only regions to record an increase in new dwelling consents over the year to February 2024, up 27% and 0.1% respectively. The sharpest declines continue to come from Wellington and Tasman, down 40% and 48% respectively. Wellington’s weakness has been driven by a sharp 46% fall in non-house consents.

The number of dwellings consented in the year to February 2024 was last seen in mid-2019, however, after accounting for a decrease in average house size, the total floor area of new dwellings consents is back to 2016 levels. This metric gives a better indication of the fall in the volume of residential construction activity. 

Rollercoaster interest rates are largely responsible for the trend in residential consents since 2020, and with only minor interest rate relief expected in the next 18 months, there is limited upside for consents. Standalone house consents have already found a floor, suggesting that further declines in overall residential consents might be limited. Declines in non-house consents have slowed over recent months, but there are still downside risks from a sluggish housing market and difficult financing conditions for developers.

Townhouse consents, the key driver of the growth in overall consents in recent years, have only unwound back to 2022 levels so far. Apartment and retirement village consents have nearly halved in the past year, taking apartment consents back to 2016 levels.