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For the first time since mid-2008, the number of building consents issued has topped 21,000 on an annualised basis. The rapidity of the recovery over the past year is evidenced by noting that this is more than a 25% increase on year-earlier levels. Making these numbers even more impressive is that the total for the 3 months to December was more than 33% up on those of a year earlier.
All this signals that not only is house building activity on the boil, it is set to remain so for some time (noting that these consent numbers also include building work yet to be undertaken).
But, a balanced reading of the numbers would also suggest a ‘glass-half-empty’ perspective can be put on these numbers. In particular, the concentration of new housing activity in Auckland and Canterbury is overwhelming.
As illustrated, new house consents in the Auckland and Canterbury regions have recovered to be well above the post-crisis lows, and are now close to or above late-2007 levels. Consents in Auckland are running at an annual rate of 6,300, which is higher than the 6,100 approved in 2007. For Canterbury, the latest year saw more than 5,700 consents issued – well up on the 4,500 approved in 2007. Further, it is clear that consents in both regions are on a strong upward trajectory.
Outside these two regions, new housing consents remains well below pre-2008 levels and, in some cases are only marginally above the post-crisis lows. The 9,200 consents issued outside Auckland and Canterbury over the latest year is considerably below the 15,000 issued in the 2007 calendar year.
In the non-residential sector, it is also a question of glass half-full or glass half-empty? The area, rather than the number, of consents is a better indicator of activity due to the widely varying size of buildings in this sector.
As illustrated, the past year has seen a strong improvement in issued consents and, consequently, in activity. The latest year’s total of 2.8 million square meters of building approved is well up on the annual 2.1 million low reached in mid-2010.
However, from the glass half-empty perspective it is clear that activity (and even activity over the coming year should the upward trajectory continue) remains well below pre-crisis levels.
Within the sector, the storage buildings sub-sector has seen the largest increase, reflecting in large part Christchurch rebuild related activity.
The rapid turnaround in migration over the past year continues to accelerate. This turnaround saw the difference between those migrating to these shores in 2013 and those leaving reach nearly 22,500. This figure compares starkly with a loss of 1,100 in 2012. Indeed, this is the largest net gain over a calendar year since the 34,900 recorded ten years earlier.
And, as illustrated, the turnaround is now on a rapidly accelerating trend. The primary cause of this rapid and accelerating turnaround is the relative fortunes of the New Zealand and Australian economies. Furthermore, the change over the past year in migration habits is heavily concentrated on this side of the Tasman, with a dramatic fall in the number of Kiwis flying west.
In particular, the net turnaround of 23,600 over the past year is dominated by the 15,000 gross reduction in those leaving New Zealand. And delving even further into the details, this 15,000 is more than substantially accounted for by a 13,700 reduction in the number of New Zealand citizens leaving to settle in Australia.
Concerns about the slowing economic growth and diminishing job prospects in Australia, coupled with brighter prospects at home appear to have kept more New Zealanders on this side of the Tasman. In addition, renewed coverage of difficulties gaining access to public services and benefits may also be encouraging a slight lift in New Zealand citizens in Australia returning home.
The 35,200 Kiwi citizens that left for Australia last year is still above the recent low of 26,400 registered in early-2010. Consequently, don’t be surprised to see overall annual net migration to improve to over 30,000 through this year.
Whether the annual loss of citizens to Australia drops to under the 20,000 – as was the norm in the 1990s – is likely to depend on the progress of New Zealand’s economic recovery.
Visitors flocked to New Zealand over 2013, with a record-breaking 2.72 million international tourists arriving here last year. This was a good 6 percent up on the 2.56 million people recorded in 2012.
This increase has been propelled by an eye-catching 16 percent increase in the number of visitors from China. In turn, this has resulted in the China market share of tourists to New Zealand climb to close to 8.5 percent. As has been widely reported, China recently became New Zealand’s second-largest market for tourists.
This month’s commencement of China Southern direct flights from Christchurch to Guangzhou is set to boost this segment of the New Zealand market.
However, by far the largest number of tourists continues to come from Australia – with a 5.4 percent increase in visitor numbers in 2013 consolidating its market share at around 44 percent.
While seemingly not as dramatic as the picture for visitor numbers, guest night data reinforces the recovery story for the tourism industry. Latest numbers see total guest nights for the 12 months to November 2013 rise to over 32.6 million – up 3.9 percent on that of a year earlier. Notably, the rise in guest nights is dominated by a strong recovery in international guest nights (up 7.3 percent); while domestic guest nights recorded a rise of only 1.8%.
It is also pertinent to note that despite this year’s 7.3 percent surge to 13 million international guest nights, this total remains well below pre-crisis level of 14 million recorded during 2008.
Data indicates that the growth in guest nights is well spread across the regions. Bay of Plenty (including Rotorua), Canterbury, and Otago (including Queenstown) recorded the largest expansions.
Of note though is the struggling situation in the West Coast, which is a major tourism destination. It seems the Coast continues to bear the exchange-rate and quake related downturn in South Island tourism.
Latest forecasts from the IMF reflect a cautiously optimistic outlook for the global economy. Growth forecasts for Japan and the United Kingdom have been pushed upwards considerably, while those for the United States, China, India and Euro area have been tweaked, also upwards.
As a result, growth over the next two years is expected to be greater than that experienced in 2013 across most areas.
The upwards adjustment in the forecast for the UK appears to be on the basis of rising confidence as credit conditions ease. A temporary fiscal stimulus is expected to underpin the Japan economy in early 2014. China experienced an additional investment surge in late-2013, while the monsoon in India was favourable for growth.
On the cautious side, the IMF appears particularly concerned about low inflation, or even deflation, taking hold. With annual inflation data in the Euro area entering relatively unknown territory, having been below 1 percent over recent months. The IMF has also pointed to relatively low inflation in advanced economies. The potential impact deflation would have (through it increasing the real value of debt) was highlighted by the agency.
The agency also noted that financial risks remain, especially in regards to fiscal imbalances in European countries. As a result the IMF expects monetary policy to remain accommodative (i.e. low interest rates), while fiscal contraction continues in many countries.
In addition, concerns as to the financial stability of shadow banking sector in China refuses to go away. Observers will continue to closely watch developments in this sphere.
Similarly, although not as prominent in the headlines, are general parliamentary elections in India set for April-May this year. These elections, with many polls indicating a potential change of government (or at least a change in the ‘flavour’ of the ruling coalition), could well signal a period of political and economic uncertainty for the sub-continent.
Latest figures suggest growth in the US finished 2013 at an annual 2.7 percent. This was helped by a considerable surge in household spending, as employment prospects and confidence staged a tentative recovery. Non-farm employment rose by nearly 2.2 million over 2013, a monthly average of about 182,000. This put total non-farm employment at 136.9 million, which is back to the level recorded in July 2008.
Closer to home, growth in the Australian economy has slowed over the past couple of years. Latest figures put GDP growth to September 2013 at an annual 2.3 percent. Consequently, unemployment has risen to be 5.8 percent in December 2013 – up from just over 5 percent in early 2012.
While every effort is made to ensure that the information, opinions and forecasts included in this publication are accurate and reliable, BERL and all contributors do not accept responsibility for any errors or omissions, or for any loss or damage resulting from reliance on or the use of information, forecasts or opinions it contains.
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