29 January 2014

The Auckland economy continued to gain momentum through the final quarter of 2013 and enters 2014 on a solid footing. The housing market remains the key driver of growth, but the latest NZIER Quarterly Survey of Business Opinions (QSBO) suggests that the outlook for business investment and employment is also strengthening.

“Consumer confidence is riding high, buoyed by housing activity; and following a strong end of year performance, retailers will be hoping that consumers remain optimistic about the prospects for the economy”, said Geoff Cooper, Auckland Council’s chief economist.

Mr Cooper said the sluggish performance of the labour market to date has played a key role in households’ financial caution, but surveyed hiring intentions firmed in the final quarter of 2013.

The Real Estate Institute of New Zealand’s (REINZ) measure of the Auckland median house price moderated to $600,000 in December, following a strong monthly rise in November. Mr Cooper said recent house price movements have been influenced by the Reserve Bank’s LVR limits, which have weighed on sales and listings of lower priced houses.

House price growth has slowed since the introduction of the LVRs. “House price growth lags sales volumes, so the slowdown in activity at the bottom of the market would be expected to increasingly weigh on broader sales and price growth in 2014,” says Mr Cooper. “However rising net migration levels could counteract much of this effect”.

Net monthly migration flows averaged just under 1500 over the five months to November, compared to an average of 420 over the first six months of the year. “The jump in net migration reflects a slowdown in Australian employment growth. This weaker economic performance reflects the start of a downturn in the minerals investment boom which has been the key driver of Australian economic growth over the last decade,” says Mr Cooper. Net migration to Australia from Auckland for the year to November 2013 was 9,652 persons, down from 13,420 over the previous 12 month period.

Mr Cooper adds, “The relative strength of the domestic economy, together with the restrictions on accessing Australian unemployment benefits, could see the recent slowdown in net migration flows sustained if there is a sharp pick up in Australian unemployment.”

Residential building activity was 29 per cent higher in the September quarter of 2013, compared to the same quarter of 2012.

November was a stand-out month for dwelling consent approvals – 779 new dwelling consents were approved, the highest monthly figure since 2006. Consents in the three months to November were 11.5 per cent higher than the three months to August; while annual consents surpassed 6,000 for the first time since 2008. Of the 779 new building consents in November, 278 were for flats and apartments. There were 1156 consents issued for new apartment builds over the 12 months to November, again a figure not achieved since 2008.

“Residential building consent issuance tends to lead building activity by around six months; so the strong growth in consents over the second half of 2013 will translate into higher building activity over the first half of 2014, further stimulating employment and spending,” says Mr Cooper.

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