The New Zealand Construction Boom
It’s no secret that New Zealand is currently in the midst of a building boom. Record levels of growth within the building and construction industry are occurring across the country. This includes new home builds, renovations, rebuilds, commercial office, retail and hospitality development and civil infrastructure projects.
Is The New Zealand Construction Industry Coping?
There have been widespread reports of shortages of skilled workers, difficulties in the supply of building materials, increasing building costs. Labour costs are a huge factor - with workers in such high demand wages are skyrocketing and retaining good staff has become difficult for some companies.
The strong demand for experienced building companies to take on so much extra work and the underestimation of rising costs has even led to some building companies facing liquidation under the strain, especially those under fixed price contracts.
What’s Causing The Building Boom?
New Zealand’s construction boom has been attributed to a variety of factors dependant on what direction you
come at it from, the reality is there are quite a number of reasons that have combined together to lead us to this point. The following are some of the prominent factors contributing to the current building boom here in New Zealand.
- Strong economic growth and stability.
- Under investment in infrastructure over the past 10 – 20 years.
- Net inward migration numbers.
- Population growth.
- An increase in new commercial developments.
- Earthquake rebuild projects.
- New legislation requirements for seismic upgrading of earthquake-prone buildings.
- Chronic shortages of housing, particularly in Auckland.
Where’s Most Of The Action Happening?
Looking forward the next five years there are several major commercial and civil construction projects underway around the country including the City Rail Link and the Puhoi to Wellsford motorway in Auckland, Transmission Gully and the Wellington Airport Extension in Wellington, the Waikato Expressway, Christchurch’s Lyttleton Port repair and expansion and the new Metro Sports Facility all looking to be completed in the early 2020’s.
Building activity across the country has seen significant increases but Auckland has been, and is likely to continue to lead the charge in the coming years. Approximately one third of New Zealand’s construction activity occurs in the Auckland area, even when taking the Christchurch rebuild into account. Demand outweighing supply in the commercial office, retail and industrial sectors is also driving non-residential building activity in the Auckland region.
The Christchurch region has experienced an overall surge in building activity which is largely contributed to earthquake rebuild factors, which by all accounts appear to have past their peak with much of the residential repair and rebuild work having now been completed. However over on the commercial and public sector front there are still some major projects underway, including the need to replace office and retail space in the central city, infrastructure and sports facilities.
The Queenstown property market has been in an extended growth phase, with large amounts of residential construction underway particularly the Fernhill and Lakeside estates. Non-residential developments include the Wakatipu High School, the two lane Kawarau Bridge project.
Hamilton And Tauranga
Building activity in other regions near Auckland seems to have had a knock on effect with areas like Hamilton and Tauranga also experiencing significant growth. Housing consents have increased significantly in Hamilton with several multi-million-dollar commercial developments in the pipeline.
Wellington, also recently rocked by earthquakes, has highlighted the risks for many building owners prompting the need for earthquake strengthening, demolishing and rebuilding. Wellington also has several major infrastructure and private central business district projects underway.
Where To From Here?
The latest forecasts predict overall construction growth in New Zealand will ease slightly in the regions over the coming years and eventually be confined mainly to the Auckland and Wellington areas where there is a continued struggle to bridge the gap between the shortage of housing and the increase in demand.
There is also the potential the lack of resources, rising construction costs and cooling house prices combined with banks tightening commercial and residential lending, that many projects (especially larger fixed-price contracts) could become unprofitable causing some to be delayed or shelved indefinitely.
While the New Zealand construction industry faces the ongoing challenges of significant skills shortages and supply chain constraints, the dynamics of population growth will continue to be a major driver of construction activity across the country.