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Speaker 1: News Talk Zibby back to business. New home consents are

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Speaker 1: at the lowest there've been since twenty nineteen. According to

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Speaker 1: Stat's New Zealand And the year to June, there were

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Speaker 1: thirty three thousand, six hundred and twenty seven new homes

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Speaker 1: consented and that is down twenty four percent. The number

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Speaker 1: of consents for multi unit homes, particularly apartments and townhouses

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Speaker 1: down twenty eight percent over the same period. Christ Church

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Speaker 1: based management consultant and construction sector advisor Mike Blackburn is

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Speaker 1: on the line and talks to me. Now, Hello, Mike,

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Speaker 1: goody Andrew, how are you very good? I am not

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Speaker 1: surprised by this due to the whole supply costs and

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Speaker 1: inflation scenario and what's been happening with constructions. But what

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Speaker 1: are the factors that have meant this drop in consents?

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Speaker 2: Well, look, building consent numbers are down right across New

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Speaker 2: Zealand and have been for probably the last eighteen months

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Speaker 2: or so. Look, probably the most important thing to remember

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Speaker 2: is that twenty twenty one and twenty twenty two were

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Speaker 2: absolutely all time record years for new residential construction in

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Speaker 2: New Zealand, and so even though building consent numbers are

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Speaker 2: down they have come off extraordinarily highs. So what we're

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Speaker 2: seeing in Auckland, for example, is that building consent numbers

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Speaker 2: a year on year are actually down by forty six percent,

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Speaker 2: In Wellington they're down by thirty eight and in christ

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Speaker 2: Huts they're down by twenty percent. So all the major

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Speaker 2: regions are sort of feeling the same effects.

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Speaker 1: There's a fluctuation though, there's a waxing and a waning

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Speaker 1: of numbers because it depends on the developers freeing up

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Speaker 1: either greenfields or brownfields and they're actually getting the money

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Speaker 1: in place.

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Speaker 2: Look, that's true. You mentioned multi unit developments, and certainly

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Speaker 2: in Auckland and in Canterbury, or certainly in christ Church,

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Speaker 2: multi unit dwellings have been sort of the predominant type

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Speaker 2: of new construction that we've seen, certain accounting for significantly

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Speaker 2: more than half here in christ Church for the last

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Speaker 2: couple of years, it's been close to seventy percent of

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Speaker 2: all new construction. Now, largely that's been driven by the

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Speaker 2: investor market. Obviously, if we go back to when the

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Speaker 2: last government changed the tax deductibility rules that drove people

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Speaker 2: away from existing dwellings, older dwellings to new construction and

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Speaker 2: so therefore the price point of multi unit construction saw

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Speaker 2: a significant boom in that. As the new tax rules

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Speaker 2: come in, we'll probably see mum and dad investors perhaps

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Speaker 2: move away from these newer units to some older units. Certainly,

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Speaker 2: the cost of construction construction inflation has been very, very

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Speaker 2: high over the last couple of years. That seems to

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Speaker 2: have sort of waned a little bit, and most merchants

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Speaker 2: and supplieres that I'm talking to are saying that because

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Speaker 2: the market is competitive, pricing is very much at play.

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Speaker 2: But again, year on year across all of New Zealand,

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Speaker 2: we've seen the cost of construction of building a new

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Speaker 2: house increased by about nine percent.

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Speaker 1: Absolutely, also the cost of actually getting your consents in

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Speaker 1: the first place. Funny enough, I actually bumped into a

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Speaker 1: lawyer today who said I've just done a consent for

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Speaker 1: a big old department building. And I said, you mean

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Speaker 1: you've done the application for a consent and he said no.

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Speaker 1: Under COVID fast track legislation, I can actually do the

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Speaker 1: whole consent, so we have the ability to get stuff going,

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Speaker 1: but we just need the money in place and the

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Speaker 1: teaper materials in place.

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Speaker 2: Well, look, that was one of the things. And I

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Speaker 2: was listening to what you said right at the start

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Speaker 2: of your show where we was talking about sort of

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Speaker 2: the economy and access to finance, and those are certainly

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Speaker 2: major influencers on the construction industry as to why we've

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Speaker 2: seen building consent numbers fall away for builders and developers.

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Speaker 2: If I go back to twenty twenty one twenty twenty two,

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Speaker 2: when our interest rates were low and money was readily available,

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Speaker 2: buying off the plans even before a builder had started

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Speaker 2: any sort of construction was really really commonplace. Today, you'd

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Speaker 2: be there's literally no appetite for buying off the plans,

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Speaker 2: and so builders and developers are being forced to fund

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Speaker 2: the development themselves, which is another reason why we've sort

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Speaker 2: of seen a significant drop off in that level of construction.

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Speaker 1: So when will it pick up again? And I know, yeah,

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Speaker 1: I'm asking for you a crystal ball, but yeah, give

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Speaker 1: it a question.

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Speaker 2: Well, look, I wrote in my report in May that

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Speaker 2: I was starting to see some light on the horizon. Now,

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Speaker 2: what you've got to remember is that for most construction activity,

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Speaker 2: it generally runs between twelve and eighteen months behind a

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Speaker 2: change in an e gnomic activity, and there's always that

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Speaker 2: lag so I deal with a lot of land developers,

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Speaker 2: and one of the things that I'm starting to see

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Speaker 2: is a lot more interest in what is likely to

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Speaker 2: happen in the economy, because again, land development takes place

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Speaker 2: again twelve months, two years, three years before any sort

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Speaker 2: of residential activity. So I'm starting to see an increase

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Speaker 2: in an interest and development activity in that market. Already,

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Speaker 2: I believe that the building consent numbers will remain flat

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Speaker 2: through till at least the end of the year. But

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Speaker 2: of course the smart developers are starting to anticipate what

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Speaker 2: that change in the market is likely to be and

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Speaker 2: will be starting to gear up their activity.

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Speaker 1: Now, any turn in the economy, any dropping the interest rates,

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Speaker 1: combined with the high immigration, we'll actually go force people

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Speaker 1: to go, Yeah, there's definitely a market there that wants

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Speaker 1: in a house and where we go. That's what I'm hoping.

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Speaker 2: Look that Look, that's absolutely true. And immigration, So if

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Speaker 2: you look at the latest immigration over the last twelve

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Speaker 2: to eighteen months, we've had an influx of people of

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Speaker 2: summer in the vicinity of a one hundred and forty

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Speaker 2: thousand people. Now they're not they're here for medium to

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Speaker 2: long term. So they're not staying in motels and Airbnb,

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Speaker 2: and they will all need a rental accommodation or ownership accommodation.

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Speaker 2: So that's the equivalent of another forty five thousand houses

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Speaker 2: that we need over and above business as usual. So

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Speaker 2: the next couple of years I see as very very

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Speaker 2: positive for residential construction right across New Zealand.

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Speaker 1: Loving that, Loving that, Mike, Thank you so much, Mike

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Speaker 1: Begburn crash It's based management consultant and construction sector advisor.

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Speaker 2: For more from Hither Duplessy Allen Drive, Listen live to

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