RMBF says building stats improved but concern remains about LVR policy impacts

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The latest building consent figures indicate one of the highest months this year for the number of new homes and apartments consented.

Statistics New Zealand figures showed 1860 new homes and apartment consents were issued for September 2013, the third highest month in 2013 behind May (1971) and July (1893).

This was bolstered by a record month in Canterbury, where 599 consents were issued, the highest in that region since records began in 1976.
RMBF chief executive Warwick Quinn says the overall result is certainly a positive one, and shows the rebuild in Canterbury is well under way.

Mr Quinn says the national growth is being driven by Canterbury and Auckland which now have 58% of all new home activity — a statistic that has now been growing steadily for the past 12 to 18 months, and is expected to continue to grow.
“While we like to see the consent figures rise, we have to be careful not to get carried away with the increase without appreciating the vagaries within it,” Mr Quinn says.
“We have been predicting for a couple of years now ‘the tale of two cities’ with Auckland and Canterbury dominating the new home construction market, and this is playing out now, well and truly.”

Mr Quinn agrees that the regions are certainly better than they have been, but it is still tough, particularly in the South Island outside of Canterbury. This is notwithstanding that the sector will most likely exceed 20,000 new homes and apartments in 2013, the first time in five years.

He says he has concerns about the impact of the Reserve Bank’s LVR policy on new home construction activity in coming months. He is aware of many building companies whose enquiry levels have dropped significantly, and potential clients have been lost as they are unable to obtain finance due to insufficient deposits.

He says while the banks will still lend on new construction, it appears many potential new build clients are either not able to obtain mortgages, or now no longer believe building is an option and are not bothering to enquire.

He believes the impacts will not be immediately apparent in statistics as existing consents have been locked in for some time. However, as today’s enquiry is tomorrow’s build, the impact may not be apparent for some months.

He says for the LVR policy to be effective, supply must be maintained, and any reduction in it is counterproductive to keeping a lid on property prices.

The RMBF is working with BRANZ and the Reserve Bank to try and get a better understanding of the potential impacts the LVR policy has on new home construction levels.