Infometrics’ quarterly report showed construction activity is a “bright spot” in Rotorua’s economy as residential consents rise. Photo/Getty Images
Building activity is a ‘bright spot’ in Rotorua’s economy as residential consents rise, according to a new report.
Tough tourism conditions continue to weigh on economic activity, but local experts say the sector is feeling good,
with strong visitor interest and a packed calendar of events for the next nine months.
Infometrics’ June 2022 Quarterly Economic Monitor showed that economic conditions remained challenging in Rotorua, with preliminary estimates pointing to a 2.8% decline in activity in June.
Lower growth in the first half of the year limited Rotorua’s annual growth to 0.1%.
The report showed a 39% increase in residential consents issued over the past year, with quarterly consent numbers at double the 10-year average.
“Construction remains a significant bright spot for Rotorua’s economy,” the report said.
“Quarterly consents have now reached or just under 100 consents per quarter for the past five quarters.”
But the tough tourism environment continued to weigh on economic activity, with overnight stays last year down a third – 33% – from a year ago. It was a bigger hit than a 19% drop nationwide.
“All areas with a strong tourism focus have been impacted by the decline in tourism over the past year as delta restrictions and then Omicron disruptions hampered demand and supply in the sector,” says The report.
Tourism spending in Rotorua also fell 15% in the year to June, while Marketview data showed a 4.8% increase in card spending in the three months to June.
A 7% drop in annual car registrations suggests that inflation remains a challenge for households, with many postponing larger purchases as budgetary difficulties force them to rethink spending priorities.
Employment grew by 2.6% over the past year, but businesses in Rotorua faced the same difficulties in finding staff as in many other areas, with growth slowing to 1.6% over the past few years. three months before June.
Senior Economist and Infometrics Director Brad Olsen said underlying economic activity had picked up since the previous peak in Omicron business in March, as New Zealand turned orange and the spending activity was rebounding.
“But capacity constraints related to finding enough labor and materials have prevented regional economies from growing even further.”
Olsen said growth in filled jobs in New Zealand had been more subdued in recent months, despite the number of vacancies and underlying demand for workers remaining high.
“A tight labor market provides a solid foundation for regional economies, but also adds pressure as short-term illnesses and the continued brain drain of young talent make it difficult to finance current levels of activity.
“About half of New Zealand’s current net migration flow is made up of young people, which is a major constraint on provincial economies, which are struggling to find the necessary talent.”
Olsen said high inflation and rising interest rates were weighing on household sentiment and undermining spending growth.
“While spending levels have increased from the previous year, high inflation means Kiwis are getting less for their money.
“Infometrics estimates suggest that about 40% of recent spending increases are due to inflation rather than real growth in spending volumes.”
Overall tourism activity in the June quarter of 2022 was weaker despite the start of the border reopening, with a 6.9% annual drop in overnight stays across the country.
Olsen said after strong growth in domestic tourism, the recent decline has contributed to a slowdown in regional economies.
“The way forward for regional economies remains uncertain as New Zealand faces a range of negative influences including low confidence, high inflation, rising interest rates, a tight labor market and ongoing supply chain disruptions.
“However, these negatives will be mitigated by the reopening of borders, reduction in the number of Covid cases and less restrictive trading conditions outside of Red.
“In the case of regions where international tourism was a very important part of their economy, the offsetting positive effects of reopening borders could be substantial in the coming quarters.”
Figures from Rotorua Lakes Council showed the number of new homes granted for the financial year July 1, 2021 to June 30, 2022 was 347. The value of building permits issued for the financial year to date was 279,404,403 $.
This compared to 280 new units granted and a value of $213,760,601 the previous year.
The council’s deputy chief executive for district development, Jean-Paul Gaston, said the continued increase in building permits was a good sign.
Gaston said Rotorua needed more housing of all types to address the current critical shortage of housing in the district, from market houses of various sizes to public and social housing, and affordable rentals.
“We will need thousands more homes over the medium to long term to meet projected future demand and we are working hard on multiple fronts to make the progress needed to get more homes built as quickly as possible.”
This included the council’s Housing for All – Plan Change 9, which would support intensification and enable more housing in a way that also protected and improved the neighbourhood, he said.
“Infrastructure needs are often a barrier to development and we continue to work with developers on stormwater planning to support housing development in Wharenui and Pukehangi Heights.
“Investment in infrastructure improvements – which in Wharenui also includes roads – has provided the certainty developers need to move forward with planned developments.
“We have also recently focused on supporting papakāinga development projects so that they are in a strong position to apply for development funding through Whai Kainga Whai Oranga.”
Gaston said the plan change was also intended to encourage this type of development by changing the rules to make it easier.
“We continue to see increased interest from aged care providers and lifestyle villages looking to establish themselves in Rotorua and we are providing support to help with site assessments and selection. .”
RotoruaNZ chief executive Andrew Wilson said border closures, disruptions at Delta and Omicron over the past 12 months had ultimately dented performance.
But he said it was positive to see an increase in spending for the quarter to June.
“This gives us good reason to be optimistic about the future of tourism as we head into the warmer months.”
Wilson said the tourism sector was feeling relatively positive with strong interest from international visitors and a busy schedule of events for the next nine months.
“It’s for all types of events, including corporate, and it’s for midweek and weekend bookings.”
The agency’s recent survey of the Rotorua business community highlighted key challenges such as costs associated with doing business, finding qualified staff and regulatory and policy changes, he said. .
Retail NZ chief executive Greg Harford said while things had been relatively positive in the year to June, things were getting tighter.
The latest retail survey results from Stats NZ suggest that retail spending in the Bay of Plenty has fallen by 0.96% in the last quarter (or 0.62% in seasonally adjusted terms ).
“It reflects customers tightening their belts as the effects of rising interest rates and a depressed housing market start to take their toll.
“We’re seeing consumers looking to cut back on their non-discretionary spending, and they’re starting to turn to cheaper brands.”