Construction surge rides on a wave generated by current strong economy
New Zealand’s construction firms are riding a growth wave that may continue for years yet.
Eight of the companies on the 2017 Deloitte Fast 50 are in the construction industry.
Deloitte partner Doug Wilson said that was driven by New Zealand’s strong economy.
‘‘The economy has been performing pretty well – we’ve been out-performing a lot of international trends. It’s driven growth in business.’’
That business growth had led to more commercial construction work as companies looked to consolidate their sites, move to new premises or shift to new locations.
‘‘That drives a lot of activity. If you travel to most, if not all, the main centres, they have quite a lot of cranes kicking around.’’
When businesses were doing better, that also boosted the fortunes of ‘‘mums and dads’’, he said, who might feel more secure in their jobs, and with more disposable income. That encouraged them to decide to move on to bigger and better houses, or prompted first-home buyers to take their first steps into the property market.
‘‘Then there are immigrants coming in,’’ he said. ‘‘That’s been the thrust of the residential construction boom. The last four to five years has seen unprecedented growth in the residential space.’’
There was also significant infrastructure work flowing through, he said, as local and central governments caught up from the global financial crisis.
Last year’s national construction pipeline, a forecast by the Ministry of Business, Innovation and Employment (MBIE), predicted the construction boom would last longer than expected, remaining above $30 billion for at least the next five years.
The workload was now expected to grow another 23 per cent by 2020, peaking at $42b, $5b higher than previously forecast and three years further out.
Julian Oxborough, founder of Tower Cranes, said demand was still ‘‘full on’’ in his sector. ‘‘We’re struggling to keep up with what’s going on up and down the country; it’s absolutely flat out.’’
The company had grown from a team of three to 110 over the past three years, he said. It had grown from three cranes to 27. ‘‘There’s no sign of a let-up – 100 per cent of the tower cranes are booked out for another 12 months, minimum.’’
Even Carus Group, which is not directly linked to the construction industry, but instead provides painting services, said the market was ‘‘really going crazy’’.
‘‘People have all of a sudden realised they want to get painting done.’’
But Wilson said there were hurdles ahead for the industry. Cost inflation for labour and materials was a problem for some businesses. ‘‘Getting people to build the required number of houses is hard.’’
Many firms had to buy land at a high price, which made it hard for buyers to commit to purchasing. Bank pressure also made it hard for some to get loans.
But commercial companies in particular would have some years left during which they could expect strong activity.