Chart below for you BlackPeter - shows annual changes in the number oif house sales and new residential consents by quarter since laste last century.
The relationship is very strong - because the drivers of both are essentially the same. Where one goes the other goes.
Main point to note is that the turning points in the cycles (bearing mind the red house sales line is advanced 2 quarters) generally coincide
The quantum of the changes are pretty similar as well aren't they. But over the last few years the annual %age change in consents been a little out of step with house sales (less extreme on the downside). You have outlined many of the possible reasons for this. This is why I agree with Tony Alexander that this time around the number of consents won't fall as low as they have have in the past but disagree with him that they will still be 30,000 this time next year
But whatever when ever the number of house sales decline so do new residential building consents.
I'm still sticking to my projection that consents will be down ~10% this time next year and thats where my 25,000 to 27,000 number comes from
As Metro point out their revenues follow residential consents numbers and that's why I reckon their revenues (and profits) will disappoint over the next year
How flat is flat?
This time may be different so all the above is a load of crap and the tightening up of credit has or will have no effect whatsoever
Last edited by winner69; 15-09-2017 at 10:45 AM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
What worries me more is whether our building industry is capable to cope with the increased demand I expect ... and this might be where the s**t hits the fan (as well for MPG). While I think they have the capacity - they have been in the past not very good to respond in an efficient way to capacity fluctuations.
Yes indeed industry capacity is a real issue .... always has been
All the things that you are optimist about that will increase demand etc have been around for decades - they are not new. So not looking in the rear view mirror at all
End of the day it is really about money - can punters afford or borrow enough to build new houses - at the moment that's a difficulty - and are busy builders / developers willing to build lower value houses and make less money - and that assumes that any future government will actually front up with the cash to build these lower value homes - etc etc
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
House sales are depressed due to a political decision to reduce speculation (investors can only borrow 60% of the value of houses they buy). This reduces the amount of capital available to buy housing stock. However - people still need houses ... and its every day more people (immigration & births) who need them. If the next government (no matter which colour) has any grey matter worthwhile talking about between their ears than they will reduce / remove the lending restrictions for new buildings.
As well - Labour is talking about restricting non residents from investing in existing housing stock. However, they still intend to allow them to build new houses (similar as in Australia). A policy like that is increasing the demand for new houses, as would be reducing the lending restrictions on new houses.
Again - given that there is real demand would I think it sensible to assume that the building boom will continue and the number of building permits will rise from the 30k pa not just I expect this year. Both political parties promised to ramp up the build rate, not to drop it - and so I think it is a fair assumption that whoever wins the elections will make sure they have no egg on their faces come the next polling day
Traditionally over supply in housing is 'the big issue' when it comes to construction (leading to economy) slowdowns. We don't have that here. Demand is high so why are consents flat to falling? As I see it this 60% borrowing capacity is creating issues in the housing market and needs reviewing. The effect has been much larger than realised. Though there's a few things at play:
Firsts home buyers locked out (Price/unrealistic 'needs'/subdivision covenants/lack of ability to save/very little true low cost housing being built)
Investment buying & selling down (trade up viability reduced, equity requirements increased, perceived flat/falling market)
Speculation down (bright line (shouldn't have effect but much dubiousity has been cut out), return on equity, lack of first home and investment buyers)
Flat/falling market outlook (why would you buy)
Other than retirement villages, two bed house construction virtually non existant (this effects FHBs,yet again baby boomers mucking up the system)
Construction industry capacity constraints (can't build a house without a floor)
Construction industry price rises (Builders and sub contractors increasing their rates, less building required to feed the kids)
I'm using what's happening NOW (no guess work - activity is slowing) to give an indication as to might happen in the FUTURE like in 3 quarters time (the lag metro uses)
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
I'm using what's happening NOW (no guess work - activity is slowing) to give an indication as to might happen in the FUTURE like in 3 quarters time (the lag metro uses)
Hi winner - sounds like you took this personal. Please accept my sincere apologies - it was not meant as a personal assault.
You are using the latest numbers available and extrapolate them - while I try to deduct what might happen based on needs and sensible political behaviour. Both legitimate methods to forecast - and I guess time will tell which method was more appropriate in this particular case.
Wouldn't be the first time I made mistakes assuming common sense behaviour ;
Discl: hold - i.e. endowment effect might impact the balance as well.
----
"Prediction is very difficult, especially about the future" (Niels Bohr)
Chart below for you BlackPeter - shows annual changes in the number oif house sales and new residential consents by quarter since laste last century.
The relationship is very strong - because the drivers of both are essentially the same. Where one goes the other goes.
Main point to note is that the turning points in the cycles (bearing mind the red house sales line is advanced 2 quarters) generally coincide
The quantum of the changes are pretty similar as well aren't they. But over the last few years the annual %age change in consents been a little out of step with house sales (less extreme on the downside). You have outlined many of the possible reasons for this. This is why I agree with Tony Alexander that this time around the number of consents won't fall as low as they have have in the past but disagree with him that they will still be 30,000 this time next year
But whatever when ever the number of house sales decline so do new residential building consents.
I'm still sticking to my projection that consents will be down ~10% this time next year and thats where my 25,000 to 27,000 number comes from
As Metro point out their revenues follow residential consents numbers and that's why I reckon their revenues (and profits) will disappoint over the next year
How flat is flat?
This time may be different so all the above is a load of crap and the tightening up of credit has or will have no effect whatsoever
maybe in november it will be flat to declining?
if you watched the block last night the auction was terrible bidding stalled at 1.1m every auction with very few bidders, compared to last years auctions on the block it looks like the fizz is gone from auckland property
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Originally Posted by BlackPeter
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