1 00:00:00,120 --> 00:00:03,480 Speaker 1: In construction continues to slow. Stats n Z saying new 2 00:00:03,520 --> 00:00:05,920 Speaker 1: home consents drop twenty percent in the year to August, 3 00:00:05,920 --> 00:00:08,799 Speaker 1: with the number of multi unit homes consented the lowest 4 00:00:08,840 --> 00:00:13,560 Speaker 1: in the last three years. Brad Olson is Infometrics principal economists, 5 00:00:13,560 --> 00:00:16,400 Speaker 1: Good Evening Golder. So what do you make of these numbers? 6 00:00:17,440 --> 00:00:20,840 Speaker 2: Well, look, they're still going down, still down quite a 7 00:00:20,840 --> 00:00:24,000 Speaker 2: bit from a year ago, and the direction is still 8 00:00:24,040 --> 00:00:27,160 Speaker 2: pointing firmly in that much softer direction. Although it has 9 00:00:27,200 --> 00:00:29,520 Speaker 2: been interesting to see the sort of shift that is 10 00:00:29,600 --> 00:00:33,199 Speaker 2: now merging between the likes of your standalone classic houses 11 00:00:33,560 --> 00:00:37,400 Speaker 2: and your likes of your townhouses are similar. Standalone houses 12 00:00:37,479 --> 00:00:41,040 Speaker 2: had been falling a lot more earlier on in the process. 13 00:00:41,280 --> 00:00:44,320 Speaker 2: They now are showing those clearer signs in a sense 14 00:00:44,400 --> 00:00:47,680 Speaker 2: of leveling out. Not confident in calling it too quickly, 15 00:00:47,920 --> 00:00:50,040 Speaker 2: but there is a lot more evidence. The likes of 16 00:00:50,080 --> 00:00:54,080 Speaker 2: your townhouses of course, much bigger part of construction these 17 00:00:54,160 --> 00:00:57,160 Speaker 2: days compared to say, five years back. They are still falling. 18 00:00:57,200 --> 00:00:59,320 Speaker 2: And I think that's just because effectively it takes a 19 00:00:59,360 --> 00:01:03,400 Speaker 2: bit longer for those multi unit dwellings to get fully underway. 20 00:01:03,680 --> 00:01:05,920 Speaker 2: Long story short, there's still not a lot of green 21 00:01:05,959 --> 00:01:08,960 Speaker 2: shoots coming through yet for construction, despite the fact that 22 00:01:09,000 --> 00:01:10,920 Speaker 2: those interest rates have started to pull lower. 23 00:01:11,000 --> 00:01:12,399 Speaker 1: Yeah, when we do you expect to see that? 24 00:01:13,959 --> 00:01:15,880 Speaker 2: Well, in a sense, I think it could be a 25 00:01:15,880 --> 00:01:18,000 Speaker 2: little while. I mean, when we look at the fundamentals, 26 00:01:18,000 --> 00:01:20,920 Speaker 2: we know the housing market still hasn't really shifted around 27 00:01:21,000 --> 00:01:24,000 Speaker 2: much yet, And from a construction point of view, there's 28 00:01:24,000 --> 00:01:26,240 Speaker 2: probably a lot of developers out there going, well, I'd 29 00:01:26,280 --> 00:01:28,200 Speaker 2: have to pay like twenty percent more to build a 30 00:01:28,200 --> 00:01:30,600 Speaker 2: house than a couple of years ago. I'd make, you know, 31 00:01:30,720 --> 00:01:34,480 Speaker 2: fourteen fifteen percent less on the house when I eventually 32 00:01:34,520 --> 00:01:36,480 Speaker 2: sold it. And interest rates they might be coming down, 33 00:01:36,520 --> 00:01:39,520 Speaker 2: but they're coming down from a higher position. So at 34 00:01:39,560 --> 00:01:42,440 Speaker 2: the moment, that doesn't sort of stimulate a whole lot 35 00:01:42,440 --> 00:01:45,080 Speaker 2: of activity on the sort of buyer side, on people 36 00:01:45,080 --> 00:01:47,600 Speaker 2: that might be keen to get in again, a few 37 00:01:47,640 --> 00:01:49,880 Speaker 2: more buyers that might be coming back into the market. 38 00:01:50,040 --> 00:01:52,120 Speaker 2: But you look at those costs still jacking and you know, 39 00:01:52,200 --> 00:01:55,800 Speaker 2: compared to you know, people's incomes. If you're own occupy, 40 00:01:55,920 --> 00:01:57,880 Speaker 2: you're a first home buyer, it's still not easy to 41 00:01:57,880 --> 00:02:00,280 Speaker 2: get money from the bank. If you're an investor, you're 42 00:02:00,280 --> 00:02:02,920 Speaker 2: still looking at housing and going, well, my rents aren't 43 00:02:02,960 --> 00:02:06,040 Speaker 2: going to make a huge huge hit in contribution to 44 00:02:06,120 --> 00:02:09,839 Speaker 2: my income and to my mortgage repayments. So I think 45 00:02:09,840 --> 00:02:11,760 Speaker 2: there's still a little bit of time yet. It's probably 46 00:02:12,000 --> 00:02:15,440 Speaker 2: one of the later parts of the economy, the construction sector, 47 00:02:15,720 --> 00:02:16,880 Speaker 2: that might actually turn around. 48 00:02:16,960 --> 00:02:19,120 Speaker 1: Yeah, there's a lag right on both the way up 49 00:02:19,160 --> 00:02:22,160 Speaker 1: and the way down when it comes to monetary policy 50 00:02:22,240 --> 00:02:25,000 Speaker 1: tightening and loosening, So it is going to take away 51 00:02:25,040 --> 00:02:27,799 Speaker 1: while What about the impact of migration, because we've seen 52 00:02:27,840 --> 00:02:31,320 Speaker 1: some massive migration numbers over the last few years. Yeah, 53 00:02:31,520 --> 00:02:36,680 Speaker 1: obviously that is starting to drop pretty significantly. So what 54 00:02:36,680 --> 00:02:38,320 Speaker 1: will that mean for demand? 55 00:02:39,080 --> 00:02:41,800 Speaker 2: Well, this is a big, big shift, you're right, And 56 00:02:41,800 --> 00:02:43,359 Speaker 2: I mean the last couple of years has just been 57 00:02:43,400 --> 00:02:46,519 Speaker 2: so topsy turvy. Right, You've had some you know, obviously 58 00:02:46,880 --> 00:02:50,040 Speaker 2: a plunge an activity through the pandemic, then you had 59 00:02:50,040 --> 00:02:52,639 Speaker 2: a big burst up to the highest levels we've ever 60 00:02:52,720 --> 00:02:55,640 Speaker 2: seen in terms of inward migration on a net basis, 61 00:02:55,720 --> 00:02:57,840 Speaker 2: and then in recent times that's been you know, slowing 62 00:02:57,880 --> 00:03:01,320 Speaker 2: down a lot quicker than expected. Both fewer people coming 63 00:03:01,400 --> 00:03:04,480 Speaker 2: into New Zealand than at those peak levels, but also 64 00:03:04,560 --> 00:03:07,519 Speaker 2: a larger number of people who are leaving as well, 65 00:03:07,560 --> 00:03:10,320 Speaker 2: so you still got population growth, it's just slowing back 66 00:03:10,880 --> 00:03:13,760 Speaker 2: quite considerably. And I think realistically, looking at that, that 67 00:03:13,800 --> 00:03:16,080 Speaker 2: says that if you look at the housing market, you 68 00:03:16,080 --> 00:03:18,080 Speaker 2: look at the building market the next couple of years, 69 00:03:18,720 --> 00:03:21,359 Speaker 2: if you've got population growth which is now slowing, you've 70 00:03:21,400 --> 00:03:23,640 Speaker 2: still got those high building costs. You don't have a 71 00:03:23,800 --> 00:03:26,880 Speaker 2: huge amount of a burst looking likely to come through 72 00:03:27,200 --> 00:03:30,760 Speaker 2: on the house prices front, get to income limits and 73 00:03:30,800 --> 00:03:33,040 Speaker 2: similar from the Reserve Bank, I think it is one 74 00:03:33,040 --> 00:03:35,920 Speaker 2: of those areas where we're not expecting a huge bounce 75 00:03:36,000 --> 00:03:37,760 Speaker 2: at all, and if it does come, it's going to 76 00:03:37,800 --> 00:03:40,360 Speaker 2: take a while. The big challenge is that the construction 77 00:03:40,400 --> 00:03:42,880 Speaker 2: sector the last couple of years has grown so much 78 00:03:42,920 --> 00:03:45,080 Speaker 2: to be able to cater with such a high level 79 00:03:45,080 --> 00:03:47,160 Speaker 2: of consents that we had at the peak. We've now 80 00:03:47,160 --> 00:03:49,960 Speaker 2: probably got a bigger construction sector in terms of workforce, 81 00:03:50,200 --> 00:03:52,400 Speaker 2: then we will have going into the future in terms 82 00:03:52,440 --> 00:03:55,120 Speaker 2: of a pipeline for residential work. So if we can 83 00:03:55,160 --> 00:03:58,800 Speaker 2: shift those people into infrastructure, that might help. But realistically, 84 00:03:58,880 --> 00:04:02,160 Speaker 2: like I say, some difficult times still for the construction sector. 85 00:04:02,440 --> 00:04:05,320 Speaker 2: Not a huge amount of a turnaround yet. The most 86 00:04:05,360 --> 00:04:06,720 Speaker 2: I think we can say is that we might be 87 00:04:06,720 --> 00:04:09,240 Speaker 2: starting to find a bottom, but that'll be cold comfort 88 00:04:09,240 --> 00:04:09,840 Speaker 2: for many. 89 00:04:10,040 --> 00:04:14,160 Speaker 1: Yeah. Hey, just looking at the government's priorities for legislating 90 00:04:14,160 --> 00:04:15,560 Speaker 1: over the next few months. I mean, you've got the 91 00:04:15,560 --> 00:04:20,279 Speaker 1: fast track various other infrastructure policies, including the funding and 92 00:04:20,279 --> 00:04:23,040 Speaker 1: financing tools for housing, and obviously the Housing Minister Chris 93 00:04:23,080 --> 00:04:26,039 Speaker 1: Bishop is looking to make some pretty significant inroads here. 94 00:04:26,160 --> 00:04:29,320 Speaker 1: What role do you think central government policy might play 95 00:04:29,680 --> 00:04:33,320 Speaker 1: in speeding up construction. I think for a lot of 96 00:04:33,320 --> 00:04:35,800 Speaker 1: the options that the government has on the table in 97 00:04:35,880 --> 00:04:39,479 Speaker 1: its latest quarterly Action Plan are important long term for 98 00:04:39,600 --> 00:04:43,320 Speaker 1: construction and generally for New Zealand's economy. You know, some 99 00:04:43,360 --> 00:04:45,719 Speaker 1: of those changes will set us up better in the future, 100 00:04:45,839 --> 00:04:47,520 Speaker 1: but they are unlikely in my mind, to have an 101 00:04:47,560 --> 00:04:50,960 Speaker 1: immediate impact. Probably much more significant is the fact that 102 00:04:51,040 --> 00:04:53,640 Speaker 1: you've got education consents across the country. 103 00:04:53,680 --> 00:04:56,719 Speaker 2: They're running. I think they're lowest in about fourteen years 104 00:04:56,720 --> 00:05:01,160 Speaker 2: on a cost adjustment basis. Look at the likes of again, 105 00:05:01,240 --> 00:05:03,640 Speaker 2: you know, all the talk around hospitals and similar recently 106 00:05:03,720 --> 00:05:07,800 Speaker 2: the talk around social housing without any of those government 107 00:05:07,920 --> 00:05:11,320 Speaker 2: public sector dollars coming into the construction sector. You know, 108 00:05:11,440 --> 00:05:14,039 Speaker 2: these longer plans aren't going to make a huge impact. 109 00:05:14,040 --> 00:05:16,640 Speaker 2: But I do think as well the previous government quite 110 00:05:16,680 --> 00:05:19,400 Speaker 2: clearly put too much money into the construction sector at 111 00:05:19,400 --> 00:05:21,000 Speaker 2: a time when there was already a lot of private 112 00:05:21,040 --> 00:05:23,800 Speaker 2: sector stuff. That's partly why we got those high levels 113 00:05:24,040 --> 00:05:27,200 Speaker 2: of cost escalation and construction. So I understand why the 114 00:05:27,200 --> 00:05:29,600 Speaker 2: government can't spend as much, but it does leave us 115 00:05:29,640 --> 00:05:32,039 Speaker 2: in a position now where the private sector and the 116 00:05:32,040 --> 00:05:34,680 Speaker 2: public sector both aren't spending as much as we might 117 00:05:34,760 --> 00:05:35,920 Speaker 2: all like on construction. 118 00:05:36,040 --> 00:05:37,880 Speaker 1: Yeah, all right, I know we're just over a week out, 119 00:05:37,920 --> 00:05:39,840 Speaker 1: but where do you stand at the moment twenty five 120 00:05:39,920 --> 00:05:41,400 Speaker 1: or fifty basis points next week? 121 00:05:42,279 --> 00:05:44,680 Speaker 2: I'm still sitting on twenty five, just because if you 122 00:05:44,680 --> 00:05:46,360 Speaker 2: look at what the Reserve Bank has said, and they've 123 00:05:46,400 --> 00:05:48,560 Speaker 2: said pretty clearly, we should listen to what they say. 124 00:05:49,040 --> 00:05:52,000 Speaker 2: They said, Look, here's the conditions for continued interest rate 125 00:05:52,040 --> 00:05:55,440 Speaker 2: declines of a normal pace, and we've had that data 126 00:05:55,480 --> 00:05:57,880 Speaker 2: come out pretty normally. In fact, you look at some 127 00:05:57,920 --> 00:06:00,400 Speaker 2: of the data, the likes of GDP and similar actually 128 00:06:00,839 --> 00:06:03,000 Speaker 2: a bit better than the Reserve Bank hope. So I 129 00:06:03,000 --> 00:06:05,400 Speaker 2: don't know if there's enough there for them to call 130 00:06:05,480 --> 00:06:07,279 Speaker 2: fifty I wouldn't put it out of my mind for 131 00:06:07,320 --> 00:06:09,200 Speaker 2: November though, all right, look forward to that. 132 00:06:09,240 --> 00:06:12,680 Speaker 1: Thanks Brad, appreciate your time. Brad Olsen from Informetrics. There 133 00:06:12,800 --> 00:06:14,280 Speaker 1: in a couple of minutes on News Talks ed be 134 00:06:14,440 --> 00:06:17,920 Speaker 1: the man formerly known as Prince Harry is back in London, 135 00:06:17,960 --> 00:06:20,560 Speaker 1: so will he meet with his family? We'll take you 136 00:06:20,600 --> 00:06:23,520 Speaker 1: to the UK next score to seven for more from 137 00:06:23,560 --> 00:06:26,920 Speaker 1: Heather Duplessy Allen Drive. Listen live to News Talk S'B 138 00:06:27,080 --> 00:06:30,960 Speaker 1: from four pm weekdays, or follow the podcast on iHeartRadio