'Unprecedented' building activity seen off the back of Auckland pent-up housing demand

Wednesday 29th July 2015

An "unprecedented" level of building work is predicted over the coming six years, due largely to Auckland's housing boom, a new reports says.

Building and Housing Minister Nick Smith heralded the latest National Construction Pipeline Report as confirming the nation is "building more than we have ever before" with $209.4 billion of work projected over the next six years, peaking in 2016 at $36.5 billion of work.

The Ministry of Business, Innovation and Employment commissioned report showed Auckland building activity will peak in 2018 at $16.3 billion, of which about 60 percent will be residential work. The value of residential work is expected to grow 22 percent over that period, while non-residential building is expected to rise by 17 percent.

"Today's report points to a golden era for New Zealand's building and construction industry," Smith said in a statement. "The challenge for government is to ensure we have the skills and capacity to meet the demands of this growth, and that the regulatory measures are in place so that quality is not compromised for quantity during this period of unprecedented growth."

Still, the report, prepared by Building Research Association of New Zealand and Pacifecon, said while the value of construction will "reach a higher peak than ever before" it "is not expected to result in a higher number of dwellings than ever before" due to more expensive costs per dwelling. The report's authors said the primary driver for more expensive dwellings was "an increase in quality and, therefore, cost per square metre built."

The report, prepared by Building Research Association of New Zealand and Pacifecon, estimates 94,400 new dwelling consents will be issued in Auckland between January 2013 and December 2020, of which 53,500 will be detached homes. Some $51.8 billion of residential work is expected between 2015 and 2020, almost half the $109.3 billion of residential work predicted across the country.

The Reserve Bank has cited forecasts that the country's biggest city has a supply shortfall of between 15,000 and 20,000 houses, and needs 10,000 new consents annually to meet population growth. Soaring Auckland house prices have been a concern for the central bank as record inbound net migration and a lack of building activity after the nation's finance companies collapsed, eroding available credit for property development.

The Canterbury earthquakes in 2010 and 2011 put even more pressure on the cost of construction as the rebuild effort soaked up much of the nation's construction workforce.

Since the September quarter of 2010, the cost of new housing has climbed 21 percent, according to government data, compared to just a 7.8 percent lift across broader consumer prices.

BusinessDesk.co.nz

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