With the deterioration of the residential market under way, a softening in the commercial, non-residential building sector now appears to be starting to show through, as the economy further contracts under threat of recession.
Yesterday's data from Statistics New Zealand had some analysts predicting the slowdown was likely to prompt more Reserve Bank cuts to the official cash rate during the year - offering some reprieve from spiralling food and fuel prices.
Fifteen of the country's 16 regions saw declines for new housing numbers in June compared with June 2007, with only the Tasman district maintaining the status quo in terms of consents issued.
Residential building consents issued in June this year were valued at $455 million, down from $691 million in June last year.
ANZ chief economist Cameron Bagrie said the issuing of 1337 residential consents in June represented the lowest level since October 1996 and he predicted residential investment was set to fall by 15% from present levels.
"Given the ongoing weakness in the housing market, we expect further declines in residential consent issuance over the coming months," Mr Bagrie said yesterday.
Statistics New Zealand said for the year ended June 2008 the value of consents issued for residential buildings fell by $458 million, while non-residential buildings rose by $298 million over the same period.
Non-residential consents were down $69 million, or 18%, to $313 million during June, compared with June last year, and there was a softening in the commercial sector, although it was still operating at elevated levels, Mr Bagrie said.
"Given the tough retail environment, this is not at all surprising, although we admit it was coming off a high base," he said.
Delays in completing commercial jobs had softened the blow to the construction sector, creating backlog of commercial work, while residential building work had declined more quickly.
ABN Amro Craigs broker Peter McIntyre said the consent decline vindicated the Reserve Bank's cutting of the cash rate last week, from a year-long 8.25% to 8%, and yesterday's data may prompt further cuts of 25, or even 50, basis points in September.
Mr Bagrie said there was nothing in yesterday's data that would prevent the Reserve Bank continuing to lower interest rates during the year.
However, despite a falling official cash rate, some analysts were expecting the global credit crunch - which has reduced the amounts major banks can borrow from overseas lenders - may see the banks maintain higher mortgage rates and possibly lower term-deposit rates to customers in order to bolster profit margins.
ASB chief economist Nick Tuffley said consent numbers had fallen more quickly than expected, but noted the Reserve Bank was forecasting a 17% downturn in residential construction for the year to March 2009.
He expected Reserve Bank governor Alan Bollard would continue to drop the official cash rate as the weakening economy placed less pressure on inflation - now 4% and heading towards 5% - and as a means of offsetting increasing food and fuel prices.
