The government’s challenge
Is to build another 10,000 houses.
It’s easy to say, but is it possible? Especially when you consider that the GDP of the property industry has already doubled to $30 billion over the last ten years – and most of that growth came in the last five following the flat line impact of the GFC.
So really, how much more is left in the tank? Are there any easy wins left?
But first, let’s consider the health of the industry and the symptoms don’t look great.
It cannot be acceptable that councils are declining more than one-third of building consents because they have issues with the quality of both workmanship and the information being provided to them. Yes, these local body’s are risk-averse, but given recent history, they are right to be so.
Yet, even with the brake, the high rate of non-approvals applies to construction, those projects that do get the green light face significant delays at every stage of the process (including design, consenting, sourcing materials, manufacturing and delivery). It is inarguable that the reliability of our skilled tradies on site is now under question as the workload stretches them to breaking point.
In short, our patient is wobbling and is in danger of a fall.
The result is increasing inefficiencies and significantly higher construction costs, especially when compared to our nearest neighbour, Australia.
It’s there for all to see, so what has been the industry response?
It’s trying to hire its way out of trouble. If nothing else that has at least kicked off a boom time for the sector’s recruitment consultants as companies compete for ever more skilled labour from within New Zealand and abroad.
Even without definitive information, there is sufficient anecdotal evidence to show that applicants for key site roles within construction and some specialist services (such as quantity surveying) are receiving offers well above the historical norm or comparable roles elsewhere.
But, with this added cost aside, simply adding people will never be enough. As businesses scale upwards so does the complexity of their management structures which in turn requires greater skill, care and attention to detail if they are to be managed and governed effectively. This is where many businesses have come unstuck, clarity in management and governance is critical. At all levels.
Even then though, where is the capacity within the industry to supply this housing production? There are only so many concrete pre-cast factories, window manufacturers or pre-nailed framing manufacturers and they running at capacity.
The solution has to lie in well-planned, medium- to long-term solutions because the quick and easy wins – like double shifts – have already been taken. This is a national issue now and unless it is confronted soon and seriously we could face another version of the ‘leaky building’ crisis.
The government must get involved, but in saying that it must also be willing to take an outlook that stretches well beyond the three-year election cycle. As I say, the easy wins have gone.
Yes, solutions such as long-term supply contracts which give factories the confidence to grow have certainly introduced efficiencies in design and construction methodologies, but more training is now needed to raise skill levels at all levels, not just apprenticeships, while there is also plenty of room for innovations such as much-touted prefabrication.
The reality is that the entire property industry needs to be pulling on all its levers to deliver better results. The problem in the past has been the boom-bust market cycle which inhibits confidence and long-term planning. So, again, the property industry cannot hire its way out of this hole and it must work in concert with the government.
It’ll take everyone to create the stable platform required to enable growth, change and good outcomes for everyone.
Managing Director, Greenstone Group