BuildNZ panel calls for action amid construction slowdown

Among the significant economic downturn in New Zealand’s construction sector, industry leaders speaking at BuildNZ are calling for decisive action to boost private investment and speed up project approvals to prevent further disruption.

New Zealand housebuilding activity has fallen sharply in recent months and is expected to weaken further in the coming year. Due to the economic situation, non-residential construction is also declining.

According to BCI Central, which monitors more than 20,000 active construction projects in New Zealand, the housing sector is expected to account for just 32% of project starts by the third quarter of 2024.

BCI Central New Zealand country director Ben Hurrell said the slowdown in the housing market was now affecting sectors that had maintained activity in the construction industry over the past decade.

“These include education, key community projects and many infrastructure projects where the number (of projects in the pipeline) has dropped significantly,” Hurrell said.

“The increasing number of delayed, deferred and abandoned projects in both the private and public sectors is also having an adverse impact on companies across the industry.”

Inflationary pressures continue to put pressure on the construction industry, causing many new investments to be canceled or put on hold. Amid the slowdown, builders and large construction companies are struggling with decreasing workloads, prompting them to take on smaller projects to maintain stability.

Hurrell said further tightening of monetary policy by the Reserve Bank of New Zealand (RBNZ) also continued to hamper the industry’s growth.

“Action from a government perspective could make it easier for private investment to finance projects, boosting construction activity across New Zealand,” Hurrell added.

“These actions may include facilitating lending opportunities and expediting key projects through the approval process.”

Construction costs have increased significantly over the past five years, due in part to material costs and supply chain constraints. However, costs have remained stable since the end of 2023 and are now at their slowest growth rate in seven years.

Andrew Moore, commercial director at CMP Construction NZ Ltd, said it was important for construction companies to mitigate risks from potential rate increases, rising costs or labor shortages.

“The key is to project future costs midway through the project, two years in advance, to ensure that subcontractors commit to honoring their current job offers scheduled at that time,” Moore said.

“Banks resumed lending, which prompted developers to take advantage of falling costs by accelerating the contracting of projects.

“However, uncertainty remains as the government has put many projects on hold, further increasing the industry’s instability.”

To address rising construction costs, the New Zealand Government has unveiled significant changes to the Construction Act aimed at reducing costs and increasing efficiency. These reforms involve streamlining the process of minor adjustments to building permits to shorten the average housing construction period.

Additionally, the government aims to remove obstacles to the use of trusted foreign construction materials to address persistent supply chain disruptions.

Chris Penk, Minister of Housing and MP for Kaipara ki Mahurangi, highlighted how high construction costs lead to higher mortgage repayments, rents and demand for social housing, showing their far-reaching effects.

“Tackling out-of-control construction prices is one of the keys to lowering the cost of living and providing Kiwis with the high-quality, affordable housing they deserve,” Penk said.

“We will ensure that more high-quality construction products are approved to increase competition, reduce the cost of building materials and support our resilience to supply chain disruptions.”

Andrew Moore, Ben Hurrell and Chris Penk will be joined by Quin Henderson, CEO of Southbase Group, and Greg Durkin, Director of the Building and Construction Industry Training Organization (BCITO), on stage in the seminar series on day one of BuildNZ, on Tuesday 25 June. Take part in a BCI Construction League panel to earn 10 NZRAB CPD points.

The panel discussion coincides with the publication of the second edition of the magazine Construction of BCI LeagueNew Zealand. The report ranked the nation’s 50 largest construction firms based on the total value of projects initiated last year, focusing on the commercial, municipal, industrial, legal and military, and residential sectors. The rankings provide insight into the total number of projects, total project value and average project value of each company.

Don’t miss BuildNZ 2024 on June 25-26. Register for free at www.buildnz.com

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