New Zealand home-building approvals fell to a record low last month in a sign that sliding borrowing costs haven’t yet revived demand in an economy buffeted by its first recession in a decade.
Building approvals fell 6% in December, seasonally adjusted, to 1,113, after a revised 4% gain in November, according to Statistics New Zealand. December was the lowest month since the government statistician began the series in 1982 and follows a 19% slump in October. Excluding apartments, consents in the latest month fell 0.7%.
The December data comes a day after Reserve Bank Governor Alan Bollard cut the official cash rate by 150 basis points to 3.5% and flagged the prospect of more cuts as the global downturn squeezes growth from the domestic economy. Banks have already responded with lower rates. The average one-year rate so far this year is 5.95%, according to Good Returns, that’s down from last year’s average 9.85% and the lowest in six years.
“There’s been massive falls in mortgage rates that will take some time to flow through,” said Philip Borkin, economist at ANZ National Bank. “We’re not ruling the prospect that the (housing market) could push lower from here but we hope it will find a base in the next few months.”
Shares of Fletcher Building, the nation’s biggest construction firm, fell 0.7$ to NZ$5.48 today and are down 4.5% this month. In November, the company said profit would fall in the year ending June 30 amid “considerably tougher” markets for its products and weaker earnings from building products, distribution and infrastructure projects.
Non-residential building consents rose 16% to NZ$388 million In December from the same month of 2007, according to today’s report.
The unadjusted number of building approvals fell to 1,127 last month fell to 1,127, the lowest since January 1987, Statistics New Zealand said.
The outlook for housing demand is clouded by expectations unemployment is set to surge this year as the economic slump prompts companies to cut their workforce and reduce new hires. ANZ National predicts the jobless rate will exceed 7% in 2010.
As home owners refinance their loans and benefit from lower interest rates in coming months, “people will decide to pay down debt,” Borkin said. “The central driver is how the labour market will perform in 2009. It’s safe to say in will be heading up in 2009 – it’s the same trend around the globe.”