Last week we covered the disappointing though unsurprising drop in building consents. Over July, consents lifted 26%. Which sounds pretty good. Especially given that that’s up from a 17% contraction in June. But looking under the hood it’s a much uglier story with annual building consents still down over 20%. So as expected, actual building activity isn’t any better. Stats NZ’s building activity data showed the lowest volume of building activity seen in a June quarter since the COVID-impacted June 2020 quarter. Compared to the beginning of the year, the seasonally adjusted volumes of total buildings fell 0.2% with residential falling 0.7% and non-residential falling 0.1%. And over the year, the volume of total buildings completed is down 6%.

We said it last week, and we’ll say it again. We hate to see the fall in construction. But we aren’t surprised by the numbers. We desperately need a solution to housing supply. The chronic shortage of supply is the driving force behind our housing crisis. Not demand. The hope and ‘good news’ here at least, is that this is old lagging data. We’ve now had a rate cut from, the RBNZ. And expect many more. As interest rates are relaxed we should see a breath of life back into the construction sector. That said, if history is anything to go by, fixing our chronic housing shortage will require more than just a lower interest rate environment.