Plenty of work to go around
Construction work ramped up early this year and is set to continue strongly in Auckland, Wellington and Waikato, according to a new report by Rider Levett Bucknall.
Quantity surveyors Rider Levett Bucknall’s report said consents for non-residential buildings were rising towards highs last seen in the previous building boom in 2008.
The biggest category was consents for social, cultural and religious buildings, followed by storage buildings and hotels.
Consents for new offices and farm and industrial buildings had fallen. While storage buildings were in demand, uncertainty over the global growth outlook would likely curtail demand for these and other industrial buildings in the coming year.
RLB expected more demand in the future for accommodation buildings to house high numbers of international and domestic tourists.
The positive picture for construction work in the RLB report is consistent with a Government report, The National Costruction Pipeline Report 2019, which forecast a rise in building activity to a peak of $43 billion in 2021.
RLB said construction cost inflation in Christchurch, Auckland and Wellington had eased, but it was rising in the smaller regions as building work picked up there.
The rising cost of building is tipped to moderate to under 4 per cent a year in 2019 and to reach about 3 per cent in four years.
RLB director Grant Watkins said Christchurch’s slowdown after the peak in 2016 was impacting quite heavily on
‘‘I think Wellington will be quite strong for a number of years yet.’’
Grant Watkins, RLB director
the national construction cost inflation figures, pulling them down.
Competition was fierce in Christchurch. Many of the companies which went to Christchurch for the rebuild were still there and fighting for work.
In Auckland, resources had flooded in bringing more competition and more labour, resulting also in a moderating of construction cost inflation there.
Building work had picked up in key markets, with Auckland continuing to dominate the picture, reflecting strong population growth. But demand was broadening to other regions, notably Wellington and Waikato, as well.
Demand for new homes was rising in Wellington and Waikato as higher house prices encouraged people to build. In those two regions, non-residential building consents also increased over the year, largely because of more demand for social buildings.
The impact of the 2016 Kaiko¯ ura earthquake was marked in Wellington driving redevelopment and construction.
Watkins said the building industry was going strongly in Wellington which had been well behind Auckland and Christchurch a few years ago. A lot of construction was underway and there was a strong pipeline of future work, including a new convention centre.
‘‘We can’t get the resources into Wellington like Auckland and Christchurch.’’
Wellington’s resource base was smaller than Auckland and Christchurch and the capital was seeing cost escalation now.
‘‘I think Wellington will be strong for a number of years yet.’’
The report was prepared by NZIER (New Zealand Institute of Economic Research) for RLB.
In Auckland yearly building cost inflation had fallen from more than 8 per cent in late 2016 to just under 3 per cent in the first quarter of this year, RLB said. It had also edged under 3 per cent in Christchurch..
Because of the large amount of work in the pipeline, RLB expected construction cost inflation to remain relatively high, and construction firms would still be battling low operating margins and labour shortages.
Those views were echoed also Colliers International’s September quite by
Chris Dibble, research and consulting director at Colliers, said the construction cost price index showed a decrease in cost inflation compared with previous years. It was now at an annual 3.7 per cent increase in June this year for residential building and 4.3 per cent for nonresidential.
That was positive but still the cost increases were double the 20-year average, Dibble said.