The economic slowdown is firmly applying the brakes to the broad property market with the latest stats of building consents mirroring the record lows experienced in the real estate market.
The January stats show just 812 consented dwellings – the lowest since record began 34 years ago, with real estate sales in January at 3,706 the lowest since the early 90’s.
Whilst the median price for property is declining it is interesting to see that the average price of residential construction is actually increasing. Over the 9 month period from May 2008 to January 2009 the average value of residential consents rose from $310,000 to $393,000. Seen on this graph below the average value of consented residential construction on a 3 month moving average (red line) has now intersected with the average sales price of residential property again measured on a 3 month moving average basis (blue line).
This intersection is the first since early 2002 and highlights a couple of interesting trends.
- The very low level of new consents contain virtually no apartment developments so prevalent through the past decade which held consent values down.
- The market for new builds is maintained through more top end custom designed properties which is spiking the average, albeit from a low base of number of consents.
A consequence of this as highlight in the NBR is the very real possibility that such a drastic cut in new builds especially at the bottom end of the market generally serviced by group home builders could lead to a very real shortage of property with consequential impact on the supply side of the market.
And just before the howls begin from those that think we don’t need any more houses as the plane queue up to take kiwi’s to Australia it is worth reviewing the latest report from Statistics NZ which shows that despite the net record exodus to Australia of 35,400 in the 12 months to January 2009, the overall net migration was positive to the tune of 4,500 in the past year.