New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Building weekly</h2>
New Zealand
<ul>
<li>House sales down on tight supply (REINZ, Oct.): House sales down -6.1% mom, -1.9% yoy (previous +8.9% mom, -0.8% yoy). Days to sell in Auckland -2 yoy to 35 (vs. long-term average 35), ex-Auckland -2 to 32 (vs. long-term average 42). House prices increasing: +1.4% mom, +5.6% yoy (previous +1.1% mom, +3.9% yoy), with Auckland +2.1% mom, +2.7% yoy and ex-Auckland +0.8% mom, +8.3% yoy.</li>
<li>Rental inflation reinforces supply tightness (Oct.): 3m rolling average rents – Auckland +0.8%, Wellington +5.6%, rest of North Island +6.0%, Canterbury +2.0% and rest of South Island +6.8%. Pressures likely to continue – TradeMe reported that rental enquires were up +17% yoy in November vs. flat supply.</li>
<li>Increasingly bullish house price expectations (ASB Housing Confidence Survey; Oct.): A net +27% (Jul. +19%) expect house price rises over the next 12 months: Auckland +2%, Rest of North Is. +43%, Canterbury +20%, Rest of South Is. +44%; fuelled by an expectation that interest rates will remain low.</li>
<li>Net migration remains supportive (12 months to Oct.): +55.6k +11% yoy (previous +56.1k).</li>
<li>Construction activity up healthily yoy (3Q): Residential volumes -1.1% qoq, +4.4% yoy (previous -0.4% qoq, +6.3% yoy). Non-residential +2.4% qoq, +12.7% yoy (previous -3.3% qoq, +10.1% yoy).</li>
<li>Government announced an additional NZ$12b to be invested in (mainly transport) infrastructure, albeit spending doesn’t ramp up until 2022:&nbsp; <a href="https://www.beehive.govt.nz/release/12-billion-extra-infrastructure-investment" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.beehive.govt.nz/release/12-billion-extra-infrastructure-investment&amp;source=gmail&amp;ust=1576628552522000&amp;usg=AFQjCNGq4QpAEdQWKVfmB6bWclU_sJLoDA" rel="noopener">$12 billion in extra infrastructure investment</a></li>
<li>Urban Development Bill aims to accelerate large urban development projects: <a href="https://www.beehive.govt.nz/release/bill-empower-urban-development-projects" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.beehive.govt.nz/release/bill-empower-urban-development-projects&amp;source=gmail&amp;ust=1576628552522000&amp;usg=AFQjCNFNKVpoSejMYMFa0hBQZyaXY5msQQ" rel="noopener">Bill to empower urban development projects</a>&nbsp;|&nbsp;<a href="https://www.interest.co.nz/property/102942/closer-look-phil-twyfords-much-anticipated-bill-will-give-central-government-power" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.interest.co.nz/property/102942/closer-look-phil-twyfords-much-anticipated-bill-will-give-central-government-power&amp;source=gmail&amp;ust=1576628552522000&amp;usg=AFQjCNFyCvPkclvhoZvfuOxkm7SCCIrPKA" rel="noopener">A closer look at Phil Twyford's much-anticipated Bill that will give central government the power to fast-track large urban development projects</a></li>
<li>Justice precinct may still be costing Fletchers money: <a href="https://www.stuff.co.nz/business/118227610/repairs-to-christchurchs-new-justice-precinct-have-cost-millions-in-two-years" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.stuff.co.nz/business/118227610/repairs-to-christchurchs-new-justice-precinct-have-cost-millions-in-two-years&amp;source=gmail&amp;ust=1576628552522000&amp;usg=AFQjCNEBV1miFFcVVEICA4fbTb_U2EaUeg" rel="noopener">Repairs to Christchurch's new justice precinct have cost millions in two years</a></li>
</ul>
Australia
<ul>
<li>Construction activity still declining sharply (Performance of Construction Index, Nov.): 40.0 (previous 43.9; contraction &lt;50&lt; expansion) with apartments 37.0 (previous 34.7), houses 49.7 (previous 48.2), commercial 43.7 (previous 45.9) and engineering 33.3 (previous 36.6).</li>
</ul>
International
<ul>
<li>US: Homebuilder confidence soars to 20-year high (Dec.): 76 (previous 71; positive &gt;50&gt; negative).</li>
<li>US: Homebuilder Toll Brothers positive on outlook (4Q): FY19 new orders (number of units) down -5%, but with 4Q up +18%. “FY2019 ended on a strong note. Building on steady improvement in buyer demand throughout the year” with the 1Q FY20 seeing “even stronger demand” than 4Q19. “October housing starts were at the highest level since July of 2007, while the months' supply of homes on the market remains constrained. Consumer confidence is healthy, household formations are strong, and interest rates and unemployment remain low. With this positive environment as a backdrop, we are excited by our prospects for FY20.”</li>
<li>UK: New construction orders mixed (3Q19): Residential +8.2% qoq, +9.4% yoy (previous -2.9% qoq, -7.4% yoy). Non-residential -3.5% qoq, -13.6% yoy (previous -19.1% qoq, -3.5% yoy).&nbsp;</li>
</ul>
Chart of the week: US homebuilder confidence has hit its highest level since June 1999 driven by tight housing supply, a strong labour market, and low interest rates
US homebuilder confidence
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1653116302525692250&amp;th=16f10c84c073795a&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-C2wV2rGdZoYcIKT2Sbxn5KFvfCLV3imTdhIQz5yJLzGia_enGAaebqfGuAfi15fPxVmEd-69Z-3B4mHAMTTaTzdZ5Sd5kw8eJvO4KW-USGvXIkPW9rysgEHI&amp;disp=emb" width="445" height="340" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source:&nbsp;Bloomberg, Forsyth Barr analysis
Matt Henry &nbsp;CFA Head of Wealth Management Research Forsyth Barr Limited
P: +64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Building weekly
New Zealand

House sales down on tight supply (REINZ, Oct.): House sales down -6.1% mom, -1.9% yoy (previous +8.9% mom, -0.8% yoy). Days to sell in Auckland -2 yoy to 35 (vs. long-term average 35), ex-Auckland -2 to 32 (vs. long-term average 42). House prices increasing: +1.4% mom, +5.6% yoy (previous +1.1% mom, +3.9% yoy), with Auckland +2.1% mom, +2.7% yoy and ex-Auckland +0.8% mom, +8.3% yoy.
Rental inflation reinforces supply tightness (Oct.): 3m rolling average rents – Auckland +0.8%, Wellington +5.6%, rest of North Island +6.0%, Canterbury +2.0% and rest of South Island +6.8%. Pressures likely to continue – TradeMe reported that rental enquires were up +17% yoy in November vs. flat supply.
Increasingly bullish house price expectations (ASB Housing Confidence Survey; Oct.): A net +27% (Jul. +19%) expect house price rises over the next 12 months: Auckland +2%, Rest of North Is. +43%, Canterbury +20%, Rest of South Is. +44%; fuelled by an expectation that interest rates will remain low.
Net migration remains supportive (12 months to Oct.): +55.6k +11% yoy (previous +56.1k).
Construction activity up healthily yoy (3Q): Residential volumes -1.1% qoq, +4.4% yoy (previous -0.4% qoq, +6.3% yoy). Non-residential +2.4% qoq, +12.7% yoy (previous -3.3% qoq, +10.1% yoy).
Government announced an additional NZ$12b to be invested in (mainly transport) infrastructure, albeit spending doesn’t ramp up until 2022:&nbsp; $12 billion in extra infrastructure investment
Urban Development Bill aims to accelerate large urban development projects: Bill to empower urban development projects&nbsp;|&nbsp;A closer look at Phil Twyford's much-anticipated Bill that will give central government the power to fast-track large urban development projects
Justice precinct may still be costing Fletchers money: Repairs to Christchurch's new justice precinct have cost millions in two years

Australia

Construction activity still declining sharply (Performance of Construction Index, Nov.): 40.0 (previous 43.9; contraction &lt;50&lt; expansion) with apartments 37.0 (previous 34.7), houses 49.7 (previous 48.2), commercial 43.7 (previous 45.9) and engineering 33.3 (previous 36.6).

International

US: Homebuilder confidence soars to 20-year high (Dec.): 76 (previous 71; positive &gt;50&gt; negative).
US: Homebuilder Toll Brothers positive on outlook (4Q): FY19 new orders (number of units) down -5%, but with 4Q up +18%. “FY2019 ended on a strong note. Building on steady improvement in buyer demand throughout the year” with the 1Q FY20 seeing “even stronger demand” than 4Q19. “October housing starts were at the highest level since July of 2007, while the months' supply of homes on the market remains constrained. Consumer confidence is healthy, household formations are strong, and interest rates and unemployment remain low. With this positive environment as a backdrop, we are excited by our prospects for FY20.”
UK: New construction orders mixed (3Q19): Residential +8.2% qoq, +9.4% yoy (previous -2.9% qoq, -7.4% yoy). Non-residential -3.5% qoq, -13.6% yoy (previous -19.1% qoq, -3.5% yoy).&nbsp;

Chart of the week: US homebuilder confidence has hit its highest level since June 1999 driven by tight housing supply, a strong labour market, and low interest rates
US homebuilder confidence

Source:&nbsp;Bloomberg, Forsyth Barr analysis
Matt Henry &nbsp;CFA Head of Wealth Management Research Forsyth Barr Limited
P: +64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Fletcher Building

Building Weekly