The fundamentals for a homebuilding upswing in 2010 are still in place, says the Department of Building and Housing’s Building and Construction Outlook for the June quarter 2010.

The report said the industry is cautious about the outlook for the residential sector and the non-residential sector continues to show signs of decline, but also points to indicators which support a rise in construction activity such as an improving outlook for employment and a projected shortage in housing due to population growth.

The quarterly Outlook, which was launched in March this year, is a comprehensive overview of the building and construction sector, providing up-to-date information for industry players and all interested in the sector trends.

Trends identified in the first Outlook were confirmed in the March quarter of 2010. In its first report the Department said the slump in residential building activity had bottomed out; this view was supported by data showing a rise in residential activity in the December 2009 quarter. Non-residential consents continued to weaken and conditions in the non-residential sector are predicted to get worse before they get better

Key themes of the Outlook for the June quarter are:

• The industry remains cautious about the outlook for the residential sector. Although consents rose in the March quarter, the growth trend flattened. Demand was held back lack of certainty regarding the domestic economic recovery, concerns about rising interest rates and uncertainty surrounding potential changes to the tax treatment of investment property. Despite that, most businesses exposed to the residential sector are reporting higher levels of activity than a year ago.
• The non-residential outlook has worsened over the past six months. The downward slide in non-residential consents has continued, as a result of high vacancy rates and a lack of development finance. There are early signs that the recent stimulus from publicly-funded building is coming to an end; public non-residential consents were down 12% for the March quarter compared to 2009.

The leading indicators still point to a rise in construction activity in 2010, although the pace of the recovery was slow and patchy through the first half of the year. Property investors appeared to be waiting on the sidelines until details of tax changes in the May 20 budget were announced. With the employment outlook now improving and New Zealand’s projected shortage of housing increasing, the fundamentals for an upswing in homebuilding are still in place.