Flood repair a challenge for strained construction sector

AUCKLAND: The multibilliondollar cleanup and repair in Auckland could put more pressure on the construction sector, already suffering an eyewatering 17% annual inflation.

Westpac senior economist Satish Ranchhod said construction cost inflation was likely to remain strong for some time.

In the past year, the cost of building a new home rose by 14% nationally, but in Auckland was up 17%.

Those figures were from last week’s consumers price index and Mr Ranchhod was yet to model how high inflation in Auckland could increase.

‘‘The coming quarters will see a large amount of repair work to housing and business assets, as well as work on roading and other infrastructure.

‘‘However, that comes at a time when the building sector is already stretched, with a large amount of work already in the pipeline and widespread shortages of staff,’’ he said.

As a result, flood repair work might take some time to complete, he said, and other planned work could be delayed when staff and resources were diverted to essential repairs.

‘‘The experience with other natural disasters like the Canterbury earthquakes highlights that completing this work could take a protracted period of time,’’ Mr Ranchhod said.

‘‘We also saw large increases in the cost of services and materials used in property maintenance.

‘‘Those cost pressures looked like they were starting to soften at the end of last year. However, recent events signal renewed upside risks,’’ he said.

Forsyth Barr analyst Rohan KoremanSmit predicted continued rain would stop work on Auckland construction sites.

‘‘Supply chains have freed up and materials lead times are much shorter now, so I can’t see it having a big impact on prices.

‘‘Finishing trades like plasterers are still in strong demand at the moment, so that’s probably one bottleneck to getting repairs done,’’ he said.

He could not foresee a major impact on house prices.

‘‘The total writeoffs will be relatively small in the context of overall Auckland housing stock,’’ Mr KoremanSmit said.

‘‘Changes to council plans will be interesting as they approved the builds in the first place — who pays if a house is now deemed flood prone?’’

Auckland now has 81 redstickered homes.

Fletcher Building is the country’s biggest materials manufacturer, supplier and distributor.

The company plans to open its new Winstone Wallboards factory in Tauranga this year.

That $400 million plant is set to replace their facility in Penrose, Auckland and production will be increased significantly.

Fletcher Building was trading on the NZX at $5.23, up from $4.71 earlier this month. —