Amid a significant downturn in New Zealand’s construction sector, industry leaders speaking at BuildNZ are urging decisive action to boost private investment and fast-track project approvals to prevent further pain.

Residential building activity in New Zealand has sharply declined in recent months, with further softening expected in the coming year. Due to economic conditions, non-residential construction is also down turning.

According to BCI Central, which monitors over 20,000 active construction projects in New Zealand, the residential sector is forecasted to account for just 32 per cent of project commencements by Q3 2024.

BCI Central New Zealand Country Manager Ben Hurrell said the residential market slowdown was now impacting sectors that have kept the construction industry busy over the past decade.

“These include education, key community projects and many infrastructure projects, where the numbers [of projects in the pipeline] have significantly decreased,” Hurrell said.

“The increasing amount of delayed, deferred and abandoned projects across both the private and public sectors is also adversely affecting companies across the industry.”

Inflation pressure continues to strain the construction industry, resulting in many new builds being cancelled or put on hold. Amid the slowdown, builders and major construction firms are grappling with dwindling workloads, prompting them to take on smaller projects to maintain stability.

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

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

“These actions could include easing lending abilities and fast-tracking key projects during the consent process.” 

Building costs have increased significantly in the past five years, partly due to the cost of materials and supply chain restrictions. However, costs have maintained stability since late 2023, now experiencing the slowest rate of increase in seven years.

Andrew Moore, Commercial Manager at CMP Construction NZ Ltd, said it was important for builders to mitigate risks associated with potential rate increases, escalating costs, or labour shortages.

“The key is to anticipate future costs midway through a project, two years ahead, ensuring subcontractors are committed to honouring their current quotes for work scheduled during that time,” Moore said.

“The banks have resumed lending, prompting developers to capitalise on falling costs by expediting project contracts. 

“However, uncertainty looms as the government have halted numerous projects, adding further instability to the industry.”

To tackle soaring construction expenses, the New Zealand Government has unveiled substantial amendments to the Building Act, targeting cost reduction and enhanced efficiency. These reforms entail streamlining the process for minor adjustments to building consents to shorten the average residential housing construction period. 

Additionally, the government aims to remove obstacles to using trusted overseas building materials to address persistent supply chain disruptions.

Chris Penk, Minister for Building and Construction and MP for Kaipara ki Mahurangi, highlighted how high building costs lead to increased mortgage payments, rents, and demand for social housing, demonstrating their wide-ranging effects.

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

“We will ensure more high-quality building products are approved to increase competition, lower building material costs, and support our resilience to supply-chain disruptions.”

Andrew Moore, Ben Hurrell and Chris Penk, will be joined by Quin Henderson, CEO at Southbase Group and Greg Durkin, Director at Building and Construction Industry Training Organisation (BCITO) on the Seminar Series Stage on day one of BuildNZ, Tuesday 25 June. Attend the BCI Construction League panel to earn 10 NZRAB CPD points.

The panel discussion coincides with the release of the second edition of the BCI Construction League, New Zealand. The report ranks the nation’s top 50 construction firms based on the total value of projects commenced in the past year, focusing on the commercial, community, industrial, legal & military, and multi-residential sectors. The rankings provide insights into the total number of projects, the total project value and the average project value of each firm.

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

This content has been created with support from BCI Central on behalf of BuildNZ. ArchitectureNow works with a range of partners in the A&D supply sector to create and/or source appropriate content for this website and Architecture NZ magazine.

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