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Source: ONE News -
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One of New Zealand's biggest companies says it is seeing signs of recovery in the home building market.
Fletcher Building has posted a 10% fall in half-year profit, the first time it has reported since New Zealand officially came out of recession. Although a fall, the profit was better than expected.
While Fletcher Building's profit fell 10% in the second half last year to $154 million, the market is cheering indiications that towards the end of 2009, conditions began to improve.
"We had a very good November and December where residential activity picked up a little bit. Whether that's sustainable going forward in the second half is a separate question," says CEO Jonathan Ling.
Helping to hold up its half-year profit were home insulation subsidies, both in New Zealand and in Australia and government investment in infrastructure like Auckland's Victoria Park tunnel.
Fletchers has a construction backlog worth $1.1 billion, with 80% of that publicly-funded work.
Without that, commercial and industrial construction is weak.
"I think that's going to stay weak for a couple of years at least," says Ling.
But in residential construction, Fletcher Building is not alone is seeing glimmers of hope.
The Department of Building and Housing predicts 20,000 new houses will be built this year, up from around 14,000 last year.
But it also warns rising interest rates and slowing migration could put the brakes on that recovery.
Analysts too warn it's too soon to celebrate.
"It's really far too early to tell. We'll probably need nine months, 12 months of data to tell if we've really seen a pick-up in construction," says Martin Allison of Craigs Investment Partners.
And Fletcher Building is still cautious when it comes to what its experiences tell us about the economy.
"The markets have stabilised, albeit at quite low levels," says Ling.
However, for now, that is being welcomed by the market as great news.
