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

Thematic (Sector/Industry)

Multiple Countries / Thematic (Sector/Industry)

<h2>Building weekly</h2>
New Zealand
<ul>
<li>Strongest year for residential consents since 2019 (Dec.): +9.9% mom, +15.8 yoy (previous -8.4% mom, +8.0% yoy) with 2019 ending up +14% to 37.5k. Non-residential trend is softening: value consented up +11.9% yoy with sqm -25.3% taking the past 12 months to +5% and -3% respectively.</li>
<li>Stuck at ground zero – integrity questions over China Construction’s Auckland apartment project: <a href="https://www.rnz.co.nz/news/national/408740/more-questions-over-auckland-skyscraper-project-s-building-standards" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.rnz.co.nz/news/national/408740/more-questions-over-auckland-skyscraper-project-s-building-standards&amp;source=gmail&amp;ust=1581492128665000&amp;usg=AFQjCNHF4ZkhRoRhihBPhr3EoaBgpxKf4Q" rel="noopener">More questions over Auckland skyscraper project's building standards</a></li>
</ul>
Australia
<ul>
<li>Residential approvals flattish (Dec): -0.2% mom, +2.7% yoy (previous +10.9% mom, -2.8% yoy) including multi-tenanted +20% yoy and detached dwellings -7%. Strong month for non-residential: +30.9% mom, +25.4% yoy. Trend series -2.7% mom, +5.1% yoy. Past 12 months +14% yoy.</li>
<li>Construction lead indicator trends also broadly flat:</li>
</ul>
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Construction finance approvals&nbsp;(Dec.): +5.1% mom, -3.4% yoy (previous -8.5% mom, -9.9% yoy). Trend series -3.0% yoy.
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New home sales&nbsp;(Dec.): Detached dwellings +2.0% mom, -3.5% yoy (previous -4.4% mom, -11.7% yoy).
<ul>
<li>Continued sharp recovery in Sydney and Melbourne house prices (CoreLogic-RPData, capital cities, Jan.): +0.9% mom, +5.3% yoy (previous +1.3% mom, +3.1% yoy). Sydney and Melbourne both up +11% from mid-2019 lows.</li>
<li>Construction activity falls again, but house building improves (Performance of Construction Index, Jan.): 41.3 (previous 38.9; contraction &lt;50&lt; expansion) with apartments 37.0 (previous 37.4), houses 51.7 (previous 50.8), commercial 39.9 (previous 41.3) and engineering 34.2 (previous 29.5).</li>
<li>Australia “challenging” for Boral: Profit warning, -17% downgrade to NPAT guidance reflects accounting fraud in its windows business, and “very challenging start to the 2H in AU including bushfire and weather related volume and cost impacts, and major project scheduling delays.” Building Products the worse hit AU division, with revenue -18%, doesn’t bode well for Fletcher Building’s Australian business. US EBITDA down -17% on revenue +4% principally on costs.</li>
<li>James Hardie growing ahead of the market (3Q20): Adjusted EBIT +20% yoy on sales +3%. 3Q US revenue +12% driven by +11%/+1% increase in volume/price. Asia Pacific EBIT up +5% on revenues down -3%. AU volumes down -4% in 3Q and -2% for 9M “driven by significant softening of the AU market, partially offset by (3-5%) volume growth above market”. JHX expects the AU “addressable underlying market will continue to experience high single-digit percent contraction in FY20.”</li>
</ul>
International
<ul>
<li>US: Lowest housing inventory since records began in 2012 (Jan.): National housing inventory -13.6% yoy.&nbsp;</li>
<li>US: Healthy pickup in alterations and additions (Remodelling market index, 4Q): 57.9 (previous 55.5; positive &gt;50&gt; negative)</li>
<li>US: Solid construction growth (Dec.): residential +1.4% mom, +5.8% yoy (previous +1.5% mom, +2.4% yoy), non-residential -1.2% mom, +4.4% yoy (previous +0.2% mom, +6.2% yoy).</li>
</ul>
Chart of the week: Australian lead indicators are flattening, rather than improving, and work done still has a way to fall
Australian housing approvals vs. construction finance approvals
<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:1658224087491251547&amp;th=170332059ce98d5b&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-boQhiL_nbscGMLZArVj9cf7PVBdQ0oamfqQ3w0mLQgKjElTLxzs7TCzTJXNThkFT17EEWZfvGeQQ8YXz3Mv0hwfBqfij6N1qythxFnz0AoAVweQEIEjB-kPU&amp;disp=emb" width="453" height="340" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Australian housing approvals, starts, and completions
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.3&amp;permmsgid=msg-f:1658224087491251547&amp;th=170332059ce98d5b&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ8TrQiIBpJOMmAOZZm3ObvJ0-EMZQCeuUNP-_7V1BkNmjBF8NlAa4DSMAw9zODItoFlNVtq4EyOTzzfA9CowrO7aWaPFVs2G4DyPv_1Q7fVmrpVHEFGyf-Yr5Y&amp;disp=emb" width="450" height="340" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: ABS, 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

Strongest year for residential consents since 2019 (Dec.): +9.9% mom, +15.8 yoy (previous -8.4% mom, +8.0% yoy) with 2019 ending up +14% to 37.5k. Non-residential trend is softening: value consented up +11.9% yoy with sqm -25.3% taking the past 12 months to +5% and -3% respectively.
Stuck at ground zero – integrity questions over China Construction’s Auckland apartment project: More questions over Auckland skyscraper project's building standards

Australia

Residential approvals flattish (Dec): -0.2% mom, +2.7% yoy (previous +10.9% mom, -2.8% yoy) including multi-tenanted +20% yoy and detached dwellings -7%. Strong month for non-residential: +30.9% mom, +25.4% yoy. Trend series -2.7% mom, +5.1% yoy. Past 12 months +14% yoy.
Construction lead indicator trends also broadly flat:

-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Construction finance approvals&nbsp;(Dec.): +5.1% mom, -3.4% yoy (previous -8.5% mom, -9.9% yoy). Trend series -3.0% yoy.
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New home sales&nbsp;(Dec.): Detached dwellings +2.0% mom, -3.5% yoy (previous -4.4% mom, -11.7% yoy).

Continued sharp recovery in Sydney and Melbourne house prices (CoreLogic-RPData, capital cities, Jan.): +0.9% mom, +5.3% yoy (previous +1.3% mom, +3.1% yoy). Sydney and Melbourne both up +11% from mid-2019 lows.
Construction activity falls again, but house building improves (Performance of Construction Index, Jan.): 41.3 (previous 38.9; contraction &lt;50&lt; expansion) with apartments 37.0 (previous 37.4), houses 51.7 (previous 50.8), commercial 39.9 (previous 41.3) and engineering 34.2 (previous 29.5).
Australia “challenging” for Boral: Profit warning, -17% downgrade to NPAT guidance reflects accounting fraud in its windows business, and “very challenging start to the 2H in AU including bushfire and weather related volume and cost impacts, and major project scheduling delays.” Building Products the worse hit AU division, with revenue -18%, doesn’t bode well for Fletcher Building’s Australian business. US EBITDA down -17% on revenue +4% principally on costs.
James Hardie growing ahead of the market (3Q20): Adjusted EBIT +20% yoy on sales +3%. 3Q US revenue +12% driven by +11%/+1% increase in volume/price. Asia Pacific EBIT up +5% on revenues down -3%. AU volumes down -4% in 3Q and -2% for 9M “driven by significant softening of the AU market, partially offset by (3-5%) volume growth above market”. JHX expects the AU “addressable underlying market will continue to experience high single-digit percent contraction in FY20.”

International

US: Lowest housing inventory since records began in 2012 (Jan.): National housing inventory -13.6% yoy.&nbsp;
US: Healthy pickup in alterations and additions (Remodelling market index, 4Q): 57.9 (previous 55.5; positive &gt;50&gt; negative)
US: Solid construction growth (Dec.): residential +1.4% mom, +5.8% yoy (previous +1.5% mom, +2.4% yoy), non-residential -1.2% mom, +4.4% yoy (previous +0.2% mom, +6.2% yoy).

Chart of the week: Australian lead indicators are flattening, rather than improving, and work done still has a way to fall
Australian housing approvals vs. construction finance approvals

Australian housing approvals, starts, and completions

Source: ABS, 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