31 May 2012

Building industry in relatively good shape despite blip

3:30 pm on 31 May 2012

Economists say the construction industry is in relatively good shape, despite a drop in building consents in April.

Official figures show issued permits fell 6% to 1200 in April compared with the previous month.

Deutsche Bank chief economist Darren Gibbs says the drop in consents may be explained by changes to building consent rules.

He says there was a big increase in building consents in March and then a decline in April and there were some building code changes at the beginning of March.

Mr Gibbs says it's possible builders put consents in back in February, which were approved in March boosting that month's figures - and that could be why figures dropped back in April.

"But even still, the April figures were up by about a third on the same month last year, so still definitely trending higher", he says.

Mr Gibbs says any analysis of the health of the construction industry should take into account the $60 million a month that Fletcher EQR is paying to contractors carrying out repairs in Canterbury.

He says Christchurch hasn't impacted these figures yet and although there aren't many new homes being built a great deal of repair work is going on.

Mr Gibbs says when considering activity levels in the building sector it's necessary to look beyond the building consent figures to assess what repair work is underway.

Infometrics economist Benje Patterson says the industry continues to be driven by a lack of housing in Auckland and Canterbury, but some regions like Waikato have also picked up.

He says over the three months to April consent numbers in Waikato rose 16%.

Mr Patterson expects a gradual increase in the number of building consents issued.

Meanwhile, Mr Gibbs says he doesn't expect an increase in construction activity to be hampered by a shortage of labour.

He says the industry is still operating at a relatively low level of capacity compared to the boom times of the last decade, so there may be builders available to do the work, but the question is whether they are prepared to move to Christchurch.