Predicted fall of residential buildings: ‘We are in volatile times’

By RNZ

A new report forecasts a drop in the number of homes to be built over the next three years, but builders say they are busier than usual.

He predicts the numbers will drop substantially as banks adjust loans.

The value of residential construction is projected to reach just $ 13.4 billion in 2023, about 43 percent less than last year.

The 2020 National Construction Project Report was commissioned by the Ministry of Business, Innovation and Employment (MBIE).

It forecasts a decline in new home permits from more than 37,000 in 2019, to an average of 26,800 per year for the next six years.

Residential building makes up the majority of construction activity and is often the most affected by changing economic conditions.

Construction Industry Council Chairman Graham Burke told Morning Report the forecast was counterintuitive because people on the ground said they had never been so busy.

“The builders say they are reserved for all of next year and some until the following year.”

He said that for construction to stop it would take something significant to happen.

“The government can do a lot to make sure consumer confidence is maintained. The government is building more houses than we’ve seen in decades; that’s a small part of the industry, we need private houses to continue.”

Burke said there was a shortage of materials from overseas, which is expected to increase over the next quarter.

“There is certainly nothing to suggest the kind of declines that are forecast in this report.

“Any business has to be prudent and we are in volatile times.”

He said there were a record number of apprentices, but that “they are barely enough to cover the baby boomers who are retiring.”

The government needed to do more to stimulate the private market, he said, as the industry awaits an announcement on more rents and first homes in early 2020.

“We would not want to see a major tightening of monetary policy because that could have an adverse effect.”

Burke said the Labor government should look at how Australia maintained consumer confidence after the 2008 global financial crisis.

“Anything to improve the land supply quickly would be a very good step. We know there is a real shortage of sections, especially in Auckland, and sections ready to go to market, so putting that infrastructure in place would be helpful .

“The supply and cost of land is probably the biggest problem in keeping prices high.”

Burke said of those looking to build their home: “Find a good builder and book early.”

The report finds that despite the forecast, the demand for residential housing remains strong.

“There is a steady stream of demand and the most recent data shows that new home permits are currently at a 46-year high,” said MBIE Building System Performance general manager John Sneyd.

“Infrastructure construction is expected to increase, particularly in Auckland and Waikato / Bay of Plenty. Infrastructure is the only construction area forecast to see sustained growth, reaching $ 10.1 billion in 2025, an increase of 6.3 percent in 2019 “.

The report foresees:

– Compared to 2019, Auckland is expected to see a reduction in total construction activity of 16 percent to $ 14.3 billion by the end of 2025. Waikato / Bay of Plenty is forecast to decline by 18 percent to $ 5.5 billion, Wellington by 35 percent. cent at $ 2 billion, Canterbury at 57 percent at $ 3 billion, Otago at 33 percent at $ 1.8 billion, and the rest of New Zealand at 29 percent at $ 4.7 billion.

– Non-residential construction activity (including hotels, offices, retail stores, and industrial buildings) is projected to fall 42% nationally, from $ 10 billion in 2019 to $ 5.8 billion in 2022 before recovering to $ 7.4 billion in 2025.

– Multi-unit homes accounted for 41% of all licensed homes in 2019. Multi-unit homes are projected to be the hardest hit by the Covid-19 pandemic, particularly apartments, and are projected to account for 32 % of all dwellings. consented in 2022.