Hopes rents are set to increase have been given a boost by the latest figures from Statistics New Zealand (SNZ) on building consents.
The SNZ figures revealed the value of residential building consents in January 2011 fell 19% from the year earlier.
"Our long held view has been that slowly this shortage will manifest itself as rising rents then rising awareness of the shortage," said BNZ economist Tony Alexander.
SNZ also reported that in the December quarter there was a 7.1% fall in residential work.
There was a small rise in non-residential consents, up 2.3%, but the value of consents for all buildings fell 11% to $537 million.
The fall in construction of new dwellings promises to provide a boost for the rental property sector and filter through into increased house prices, according to Alexander.
In his February 17 BNZ Weekly Overview he said that 25,000 dwelling consents are required each year to meet population growth while in calendar 2010 the figure 15,602.
"That will then translate into even less willingness of vendors to sell, more willingness to price rents up to make property yields better, greater interest from buyers as they read the shortage stories, then rising average house prices."
"We are at the rising rents stage which as we noted last week is being accompanied by larger more yield-focused professional residential property investors picking the eyes out of properties on offer at the lower end of the market."
"Overall construction has been slowly recovering from the low point reached during the recession, but activity continues to track well below the level achieved at the peak of the building boom," said ASB economist Chris Tennent-Brown.
"Low residential and non-residential consent issuance over the preceding year was a precursor to weakness in residential building work done in the fourth quarter. Residential building work volumes were weaker than our expectations, contracting 7.1% quarter-on-quarter. Very low levels of building consent issuance over the past six months indicates this weakness is likely to continue in early 2011", he said.
The figures were also supported by the February ANZ Property Focus.
ANZ highlighted a lack of new building as one factor likely to lead to house price increases as demand outstrips supply, especially in Auckland were immigration factors are most prevalent.
SNZ figures revealed in January 2011 consents were issued for 90 new apartment units and 777 other homes.
"January commonly has a low value of consents issued when compared with other months, but at $537 million, the latest value for all buildings is the lowest for any month since February 2002," said business statistics manager Louise Holmes-Oliver.
This gives a total of 867 new homes authorised, down from January 2010 and the second-lowest total for any month since the series began.
The long-term trend indicates the number of new homes authorised has been in decline since early 2010 - and is down 23% since then.
SNZ also revealed fewer homes were authorised in 12 of the country's 16 regions in January 2011 compared with January 2010, with numbers falling 17% in both North and South Islands.