NZCB in the media NEW HOUSE BUILDS PLUMMET

BUILDING COMPANY’S RESIDENTIAL WORK COULD HALVE Carmen Hall

A major building company estimates its pipeline of residential work could drop by up to 50 per cent this year compared to 2022.

An industry leader also fears skilled tradies could lose their jobs if margins aren’t retained, while some developments have been put on hold or rescoped to make them more affordable.

Builders told NZME that high interest rates and inflation had a huge impact on the industry and were another “nail in the coffin of housing affordability”.

Master Builders Association chief executive David Kelly said the sector has been here before.

“We are resilient, but we also need to be careful not to talk ourselves into a bigger recession.”

Classic Group director Peter Cooney said the slowdown was about to be felt, with sales well down.

“I suspect they will stay this way until we see interest start to trend downwards.

“Interest rates have had a huge impact, with uncertainty and the cost of servicing mortgages making it very hard for people to commit. Inflation has caused house prices to increase substantially.”

Cooney said he estimated its pipeline of work could fall 40 to 50 per cent this year compared to last year.

Questioned if that may prompt any job losses, he said: “With any downturn in the construction sector, you will always see job losses.

“I would like to think that the Government [will continue] to put infrastructure in the ground while the slowdown is here, as we all know that the market will at some stage bounce back — maybe not to levels seen [previously], but it will come back.’’ Cooney said the Government’s housing development should help the industry “if they can start to get the volume under way, which to date seems to be an issue”.

Venture Developments director Mark Fraser-Jones agreed the effect of inflation on the price of construction has been another “nail in the coffin of housing affordability”.

Coupled with the huge increase in the cost of developing land due to, in his view, increasing bureaucratic overzealousness at central and local levels, the end price of a house had risen dramatically over the past few years.

“Rising interest rates to combat inflation are a necessary evil, and despite the rising of them being swift and fairly severe to anyone with a mortgage, they are only at around 6 to 7 per cent, which up until recent times was a fairly normal rate.

“Generally speaking, I would expect demand for new housing to stay slightly muted until interest rates stabilise and inflationary pressure eases, which will reduce the amount of cost increases the industry has to pass on.

“It looks as though that may be happening now, so that should bring some confidence back to the market.”

The biggest challenge for Venture Developments as a company was working on new ways to keep the price of a new build affordable, he said.

“This means constant innovation in the type of housing we can offer to the market.

“Expect to see more terrace townhouse developments, as land scarcity continues to be a big issue in this region.”

New Zealand Certified Builders Association chief executive Malcolm Fleming said inquiries for new builds or alterations and additions in the small to medium residential market had dropped about 20 per cent from a year ago.

Forward workloads were resembling pre-Covid levels. However, members were reporting an estimated 20 per cent of residential projects booked in for 2023 had been rescoped to make them more affordable.

“This is due to increased interest rates impacting on the amount a homeowner can borrow, in combination with the rise in building costs that occurred last year.”

The challenge for 2023 was to ensure builders had a good forward pipeline of work and could retain margins to keep their skilled workers.

“The industry is particularly focused on the latter point, with memories still fresh of the medium to longterm consequences of letting talented people go — they are very difficult to replace.”

Firms resizing was more acute in the commercial build, group home build and apartment development markets compared to the small to medium residential build market.

Fleming said some developments were being put on hold as commercial and industrial building tenants, along with purchasers of spec homes and apartments, withdrew from the market.

“One possible outcome is that builders contracting to developers who no longer have a forward pipeline of work may choose to transition to the small to medium-sized housing market, rather than exit the industry.”

Recessions were not good for any industry, he said.

Bay of Plenty Times, Tauranga 04 February 2023

“For construction, there will be a focus on builders differentiating their service offer from their peers.

“This will be beneficial to qualified builders versus unqualified builders.

“Homeowners now faced with builder options will generally select a qualified builder over one who isn’t trade-qualified.

“This will have a positive impact on the quality level of building work undertaken.”

David Kelly from Master Builders said it was tricky to predict what the remainder of the year would look like.

Builders in two minds about slowdown

TAURANGA: Some in the building industry are optimistic that sky-high demand is easing back to pre- Covid levels. But with economic uncertainty, there are also concerns demand could dry up altogether.

NZ Certified Builders chief executive Malcolm Fleming said it was seeing a 20% slowdown in inquiries for new residential builds.

There had also been a 20% scale-back in existing projects, such as renovations, which had provided a reprieve for the industry, Mr Fleming said.

“[Builders] really do not want to live through the demand that has been on the industry over these last two to three years because that has been very, very stressful — not only the workload itself, but of course we’ve had to deal with cost escalation and the building product supply has been difficult at times,” he said.

The slowdown could make it a good time for people who wanted to build or renovate.

“This is a really good time for home owners who are thinking about undertaking a building project to do something they haven’t been able to — and that’s exercise due diligence in choosing a builder,” Mr Fleming said.

Jamee Colman has owned Namloc Building in Wellington for a decade and while things were hectic last year, he was worried about what would happen once current projects wrapped up.

“I find it more stressful in this scenario because when there’s too much work I get to pick my work, whereas now it’s stressful to think, ‘oh what if that job doesn’t come?’ or ‘what if that person, who would have said yes, decides not?’ which is what’s happening now,” Mr Colman said.

Otago Daily Times, Dunedin 18 January 2023

But the competition might be good for business.

“I’m just going to have to start fighting, which is probably good for me and good for business.

“It’s good for clients because the price is going to drop,” Mr Colman said.

CoreLogic’s Cordell Construction Cost Index shows the cost to build a standard home increased 10% in the last quarter, surpassing the previous record of 9.6% in the third quarter of 2022.

Prices for materials were not necessarily expected to drop, but there would be a slowdown in the rate of increase.

Specialist Trade Contractors

Federation president Grant Price expected a labour surplus this year once the backlog of work dried up.

“What [it] looks like going forward is that we’re back in a cycle of boom and then deflation, so people will go out of the industry.

“Right now, we’re looking for labour, but I believe that there will be labour surplus,” Mr Price said.

He said the industry had historically operated on a boom-or-bust model. The industry looked to be slipping that way again and it was a sign reforms were needed, he said.

But he said those in the industry had to remain optimistic.

“What you’re trying to do is trying to remain incredibly positive, and behind your back you’ve got your fingers crossed.” — RNZ

Apprentice Challenge

Northern Advocate, Whangārei 24 February 2023

Building apprentices are encouraged to send their entries into the NZ Certified Builders (NZCB) annual Apprentice Challenge Sponsored before March 17.

Regional heats of the ITM sponsored competition will be held on April 1, with great prizes up for grabs and the winner of each going on to compete for the coveted title of national champion in May.

Regional winners will score an all expenses- paid trip to the national final held at the NZCB Annual Conference and Expo in Christchurch. Enter by visiting apprenticechallenge.nz.