Views from Andy Thomson, Managing Director CCC
There is a lot in the media about the construction industry at the moment, most of it not great. However, the industry itself has an effect on most households in New Zealand, encompassing 1 in 5 people employed in the last 4 years and accounting for over $9bn turnover per annum into the economy.
This is possibly why the Government has been instrumental in setting up a new Accord, including many of the country’s larger construction companies in an attempt to alleviate issues that are felt to be hounding our industry.
This Construction Industry Accord’s agreement “is intended to provide a platform to reinvent the construction sector”, building industry leaders have said. The Accord is designed to address past issues in this sector, which are having an impact on the economy and the wellbeing of New Zealanders.
The intention is a commitment to start treating each other differently and replace the current adversarial culture with one based on respect, trust and shared responsibility. One industry leader stated, “We’re agreeing to uphold new standards of behaviour and to be held accountable if we don’t.”
This is great headway for the construction industry, who I said in my last update are generally working on approximately 3% margins. I will be watching what happens here very closely.
Construction inflation levels sitting at 8% across Auckland and Queenstown has been mentioned within the industry, this is one of the largest increases in a term that I have seen in my nearly 30 years working in the construction industry. I have recently read that this will halve to 4% by the end of 2019 which is more palatable.
My prediction is that we will have a slowdown in the sector by the end of this year/ beginning of next year with lots of large projects coming to an end, like Commercial Bay in downtown Auckland and 277 Shopping Mall in Newmarket. Many architects are stating that they are slowing down for workflow at the moment which is always a tell-tale sign of an imminent slowdown in construction.
The good news is that with very low-interest rates, construction costs should level out and getting a tradesman will be easier for that small job around the home you may have been putting off, or the new home you were going to build. It is harder to get loans from banks for developments now with their new regulations around loan ratios, this is hindering the entire process. However, when speaking to leaders in the construction industry they’re saying their books are full at the moment and they are looking for work to start around the middle of next year, which bolsters my prediction.
Outside of the Auckland and Queenstown regions, we have already seen the slow down begin. This means we will have to keep a close eye on things going forward.