New Zealand home building consents rebounded in July from a weak June figure, suggesting the residential construction industry is closer to a revival as demand for housing recovers.
Building permits rose a seasonally adjusted 5% in July, according to Statistics New Zealand. Approvals were granted for 1,214 units including 55 new apartments. In June, consents tumbled 9.6%. Core consents for residential property, excluding apartments, surged 11%.
"Today's consent issuance suggests the construction industry is close to reaching a turning point," said Jane Turner, economist at ASB. "Ex-apartment consent issuance now looks to have made a tentative recovery, following the pick-up in demand evident in house sales."
Property demand and prices have stabilized after last year's slump in an economy that may be in its sixth and possibly final quarter of recession. Record low interest rates and rising net migration are helping bolster demand. A net 14,500 people entered the country in the 12 months ended July 31, according to government figures.
"Demand for new housing will be underpinned by the recent increase in net migration," Turner said. Still, "rising unemployment and slow wage growth will moderate the increase in demand as households remain slightly cautious."
Property prices have stabilised this year with the median price unchanged at $340,000 last month, according to recent data from the Real Estate Institute, and economists are betting Reserve Bank Governor Alan Bollard won't cut the official cash rate below 2.5% for fear of reigniting a housing bubble. The value of commercial property rose to $331 million from $301 million a month earlier, but was down 3.2% from July 2008.
"The impact of the recession is evident in some areas with consent issuance for shops, factories, storage and farms down on year-ago levels," Turner said. The total value of consents for all buildings fell 10% to $813 million in July from a year earlier.