Canterbury housing supply constraints starting to ease

Wednesday, 4 February 2015, 11:10 am
Press Release: ASB Bank

ASB Cantometer Index: Canterbury housing supply constraints starting to ease

4 February 2015

• ASB Cantometer Index edges slightly lower but remains historically high.
• Residential building consents surge.
• New housing construction helping alleviate housing supply constraints in Canterbury.

The ASB Cantometer Index edged slightly lower over the last month, down to 1.7 from 1.8. However the Index is still sitting at a very high level.

“Construction is continuing to drive the lift in Canterbury activity,” says ASB Chief Economist Nick Tuffley. “Residential building consents surged over the final months of 2014, lifting to very high levels and we expect to see a steady lift in Canterbury housing construction over the coming year.”

Non-residential building consents edged slightly lower, but also remain historically high. Commercial construction projects tend to be lumpy and cause some volatility in the index.

An increase in new listings suggests the Canterbury market is becoming less tight.

“Importantly, the lift in new listings has now been sustained for a number of months and indicates completed housing construction is finally alleviating some of the pressures on the Canterbury housing market,” says Mr Tuffley.

“Adding to this, Canterbury rent growth has also slowed, pointing to some stabilisation in housing supply pressures. As a result, the rate of house price growth in Canterbury is starting to reduce.”

Outlook
“All activity indicators remain at very high levels, but some have dipped in the past few months indicating that some slowing in growth is possible in the early stages of 2015,” says Mr Tuffley.

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“Activity has ramped up very quickly in Canterbury, to extraordinarily high levels in some circumstances, making it likely that bottle necks and capacity constraints could start to bite over 2015. We expect the ability of supply to meet still-growing levels of demand to be a key challenge to strong Canterbury growth over the coming year.”

Click here for the full report.

About the Cantometer
The Cantometer is designed to summarise activity in Canterbury. The study takes a range of publicly available regional economic data, which are standardised and aggregated into a summary measure. The index has been rebased to zero in June 2010 (the end of the quarter immediately preceding the first earthquake) such that a positive number represents activity being above pre-earthquake levels.

Along with the aggregate Cantometer index, there are five sub categories: Construction, Housing, Employment, Consumer spending and Miscellaneous*. These sub-indices will provide some insight into which sectors are driving the rebuild activity at a given point in time.

For most activity the data reference the level of activity. However, when incorporating wages and house prices into the index we believe levels are less informative. Instead the index uses prices relative to the rest of the country.

An increase in relative prices is a signal for resources to be reallocated to the Canterbury region.

The historical Cantometer series represented on the charts is a simple average of the complete set of data for each month.

*The miscellaneous category includes car registrations, guest nights and permanent and long-term net migration. A common factor driving these areas will be population growth, and we expect all these indicators to increase as the rebuild gathers momentum.

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ENDS

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