Building activity less than tipped

WELLINGTON: The volume of total building work in the June quarter fell short of expectations and a series of constraints hitting the construction sector may mean future increases are gradual.

The seasonally adjusted volume of total building activity, which excludes the effects of higher construction costs and typical seasonal patterns, rose 0.8% in the three months to June 30. Nonresidential building work expanded 1.2% and residential building work increased 0.5%, Statistics New Zealand figures show.

That fell short of the 2.9% tipped by seven economists polled by Bloomberg.

Westpac Banking Corp senior economist Michael Gordon said it was ‘‘not a big miss, given how much this survey can jump about’’, noting timing could be an issue, especially for commercial projects.

A recent increase in Auckland building consents was driven by apartments and ‘‘the timing of when the work is actually done tends to be lumpier and slower than it would be for standalone houses’’, he said.

Auckland residential building consents jumped 28% in the year to the end of July to 12,845, of which just half were standalone houses.

Stats NZ said the value of total building work rose 1.8% in the quarter after a 0.1% increase in March. Of that, the value of nonresidential work rose 2.5% in the quarter after falling 0.4% in the prior quarter. The value of residential work increased 1.4% following a 0.3% gain in March.

Mr Gordon said while the level of work remained high, ‘‘we are increasingly seeing constraints on future growth with issues around capacity constraints, access to finance, rising costs, all weighing on the potential for growth from here’’.

‘‘We are assuming the pace of growth will continue to be gradual,’’ he said.

Escalating labour and building product costs have made it harder for commercial construction companies, especially in vertical buildings.

Fixedprice contracts, leaving construction firms carrying the risk, prompted Fletcher Building to exit the market for now after taking on several unprofitable projects, while other firms buckled under the weight, such as Ebert Construction.

The value of construction work on office, administration and public transport fell 3% to $375 million in the June quarter from a year earlier, bucking a 9% increase across nonresidential activity to $1.96 billion.

Of that, farm building construction work jumped 28% to $104 million, factories and industrial building work lifted 17% to $209 million and work on shops, restaurants and bars rose 30% to $261 million. About $202 million of work was carried on hotels, motels, boarding houses and prisons, up 40% on the year.

The actual value of all building work rose 8.1% to $5.57 billion in the three months to June 30 from a year earlier. The value of residential work was up 7.6% at $3.62 billion. — BusinessDesk