Auckland city business and economy report 2008

Executive summary | Past economic performance | Relative international economic performance | Economic structure | Population | Labour market | Retail trade and tourism | Building and property | Inflation, interest rates and the exchange rate | Focus on manufacturing | Focus on Rosebank 2030 | Economic outlook | Auckland city in figures | Download the report

Building and property

House prices in Auckland city increased by 7.8 per cent in the year to March 2008, which was slightly above the 7.4 per cent increase to March 2007. In the year to November 2007, annual house price inflation in the city peaked at 12.1 per cent, although this is still below earlier peaks of nearly 20 per cent experienced in 2004.

In the month of March 2008, Auckland city's median house sale price was $510,000, matched by North Shore city. This is above the median sale price in the region as a whole ($437,500) and New Zealand ($349,000).

The annual average number of days to sell a house, another measure of market strength, has been increasing in Auckland city since September 2007. It sat at 32 days in the year to March 2008, similar to the 33 days in the Auckland metropolitan area as a whole, but lower than the 36 days in New Zealand.

An easing in house price inflation and an increase in the average number of days to sell reflects a softening in New Zealand's housing market.

House prices Annual percentage change

Source: Real Estate Institute of New Zealand.

The volume of house sales in Auckland city has decreased to 8850 in the year to March 2008, from 11,546 in the year to March 2007. The number of sales in the month of March 2008 decreased by 57 per cent on those in March 2007. Similar changes have occurred in the rest of the region and the rest of New Zealand.

There were 1864 new residential consents issued in the year to March 2008, up 8.1 per cent on the previous year. Annual consents have remained stable since March 2006 from a peak of 5622 in the year to December 2004. This reflects the easing in the housing market where lowered demand for new houses, due to higher interest rates and affordability issues, has reduced the number of new residential building consents.

The value of non-residential building consents decreased by 15 per cent to $499.6 million in the year to March 2008. This was mainly due to a 25.4 per cent decrease in the value of consents for new works during this period, a large share of which occurred in the last three quarters of 2007, attributed in part to easing construction costs.

Consents for alterations to existing buildings comprise the largest number of non-residential building consents. Valued at $233.3 million, they increased by 3.0 per cent over the year to March 2008.

The outlook for building investment among businesses has declined since the June 2007 quarter. The general business situation has also deteriorated since the December 2004 quarter, to below levels not experienced since June 1994.¹³ Businesses are cautious due to the increased cost of borrowing, uncertainty in the domestic and international economies and other pressures on business profitability. Firms may therefore delay or decrease their investment spending, at least in the short-term.

Residential building activity in Auckland city Annual new residential consents issued

Source: Statistics New Zealand.

Value of non-residential building activity in Auckland city Annual running total of the value of non-residential building consents ($million)

Source: Statistics New Zealand.

¹³ NZIER Quarterly Survey of Business Opinion.

Published August 2008