Everyone loves a good soundbite, so it’s no surprise that the RLB Cranes Index gets more attention than the analysis RLB does to back it up. And hey, cranes are a pretty visible sign of stuff happening, and they’ve been a symbol of construction and ‘progress’ for decades.
I spend a lot of time looking at housing and construction, and it was about two years ago that I wrote “the construction sector is under pressure – there are too many people wanting things built, and not enough builders to do the work… we can’t speed up the rate of building much faster without it causing major cost increases”.
Two years on, we’re in much the same situation. The graph below shows how much work builders do each year, in “volume” terms (covering up to March 2018).
We’re at a plateau, essentially. in the year to March 2018, builders across New Zealand carried out just 0.6% more work than they had the year before. But the cost of building got more expensive – by about 5%.
The graph above shows almost 30 years of data, so it’s worth spending a bit more time on. New Zealand builders had a similar boom/ plateau in the mid-2000s. That didn’t end well. The level of activity dropped by 29% in four years. And then it went up, up up – it’s risen by 69% since the deepest part of the downturn, taking us to record levels.
Imagine how those ups and downs have been for people in the industry, the tradies and the builders and the professions that rely on construction. Many of them would have had a pretty skinny few years after the GFC hit. Many left the industry or even the country. In 2007, there were around 195,000 people employed in construction. That fell to 160,000 during the downturn, and now it’s up around 250,000.
And imagine the logistical challenges in trying to grow at double-digit rates through the last five years, getting people and machines and material to where they need to be. Not easy. How can the industry keep growing when it’s employing record numbers of people but still needs tens of thousands more, or when supply chains are stretched and it’s hard to get the product? Is it just an endless treadmill or is there actually time to innovate, which is obviously what we want?
Anyway, let’s move on to the regional picture. These figures are for ‘revenue’, not activity. Part of the growth shown here is due to (hefty) price increases, not just more stuff being built:
Starting in 2012ish, Canterbury started responding to the 2010/11 earthquakes with the biggest building boom the region had ever seen. This boom has been tailing off since 2017, although it’s still high by historical levels.
Auckland is still growing, but probably not by much when you take off price increases. Auckland is both the biggest challenge and the biggest opportunity for NZ builders. The level of construction still needs to scale up further, much further, to make a dent in the housing shortage. But it’s not easy when living costs are high, roads are congested, and you’re competing with other parts of NZ and overseas to get resources in place.
And yet some good stuff is happening. The Unitary Plan passed, Kiwibuild has huge potential, the new government is more focused on housing and looking at the regulation around building.
90,000 Aucklanders are working in construction – some of you must be reading this blog. What do you think? What are you seeing on the ground, what are the prospects, what are the challenges as you see them, and how do we get on top of all this? What about our architects, engineers, developers? What’s going well and what’s not?