New Zealand building sector on path for recovery: BIS Shrapnel
According to a new report released by BIS Shrapnel, New Zealand’s building sector is expected to reach a new peak by the year ending March 2016.
BIS Shrapnel’s Building and Construction in New Zealand 2014-2019 report cites a rebound in Auckland’s housing sector and rebuilds in Canterbury as the driving factors behind growth in the building sector.
Remediation work on leaky homes and schools and earthquake-risk buildings is also contributing to the sector’s recovery, with total building authorisations over the next five years to 2019 forecast to hit NZ$10 billion (A$9.26 billion) in value in 2016 (in constant terms).
“We expect Auckland to experience strong growth in residential construction over most of the next five years,” said Adeline Wong, the report’s author and BIS Shrapnel senior project manager.
“The number of dwelling consents in Auckland is expected to increase from 4,760 in 2012/13 to an estimated 6,350 in 2013/14 and then to around 10,000 by 2017/18.
Wong said building activity should be underpinned by a number of demographic factors.
“Relatively low levels of new residential building in recent years have left a housing shortage, although 2013 Census data indicates this may be less than previously thought,” said Wong.
“Population growth including through immigration, firm economic growth, and relatively low – but rising – interest rates should also support the demand for residential dwellings.
“Auckland’s high house prices are likely to drive first home buyers to settle for cheaper apartment prices in high density living in the inner city. The high density housing sector may thus present an upside over the forecast period – which is in line with Auckland’s Unitary Plan that calls for up to 70 per cent of new dwellings to be built within the current city boundary.”
BIS Shrapnel expects that total annual average valuations will reach NZ$5.85 billion (A$5.4 billion) in constant terms over the next five years.
Reconstruction in Christchurch is likely to provide a major boost to the non-residential building sector over the next five years. However, the report also points to growth in new building and refurbishment activity in the factory, office building and warehouse sectors in New Zealand’s North Island, as leasing activity picks up in response to growth in the domestic and global economy over the next two to three years.
Annual average commercial and industrial building authorisations are forecast in the report to reach an estimated NZ$2.39 billion (A$2.21 billion) in constant terms, 14% higher than the levels seen during 2004-2008’s boom years.
Wong notes that reluctance from owners of properties that are quake damaged or at risk of damage from earthquakes may dampen their outlook.
“The non-residential building sector over the next five years may get an extra lift from potentially wider earthquake strengthening work in office buildings and schools in Wellington in particular,” said Wong.
“However, there is also a downside risk to our forecasts in that the timing and scale of Christchurch reconstruction, and also seismic work in Wellington may not be as expected.
“Some owners of quake-damaged and earthquake-risk properties may not commit to redevelopment in the short term, which would impact the overall outlook.”
