15 Apr 2024

Recession, high interest rates take toll on construction industry

9:36 pm on 15 April 2024
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Photo: 123RF

A decades-old building company has had to "pull the pin" after a sharp down turn in business.

Tony Boyce of Tony Boyce Builders was finishing up a few jobs this week before closing down his company for good.

Things had been tough with no work coming in, Boyce told Checkpoint.

"Telling the men I had to lay them off ... that was my worst problem."

Boyce said he had got his team down to nine but even that was not enough. He had thrown "mega bucks" into the business to keep it afloat but had decided to "pull the pin" now.

"I feel gutted. I feel like I've failed. In a lot of ways I haven't, but it's really hard."

Boyce said the construction industry as a whole was struggling. People were closing up their wallets, worried about a recession and dealing with high interest rates.

He told Checkpoint he had spoken to a builder this morning who worked in housing and usually had two-and-a-half years work lined up.

Now he only had eight months and was worried about what the future would look like.

"It's affecting everyone, really."

New Zealand Construction Industry Council executive director Tommy Honey said it was "pretty tough" at the moment.

There were a lot of changes being made by the coalition government - some which the council welcomed - but others that had the industry in limbo.

Honey said the council supported the government's decision to allow imported building supplies but said it was "good at stopping things" but not starting them - or saying when they would be started.

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Honey said the construction industry needed clear signals and direction. At the moment, they were "weak" and "vague".

There was hesitancy and reluctance from people needing building work done, Honey said.

It was also a time for people to do their due diligence and make sure a developer was able to deliver what had been promised.

Boyce said work in the industry would pick up again and suggested others "ride the storm if you can".

Importing building products would help but would take a "wee while" to get into action - and more doors would close in the meantime, he said.

Last week it was reported that building cost inflation had slowed to its lowest level in eight years, as liquidations rose.

CoreLogic's chief property economist Kelvin Davidson said that would give more certainty to people building new homes and doing renovations.

But, builders were experiencing a decline in their pipeline of work.

"We do know that workloads are slowing and also anecdotally we're just starting to see those concerning reports about a few more builders going into liquidation," he said.

"The near-term indicators are that that will continue.

"We just have to hope that at a time when population growth is very strong off the back of net migration that building consents find a floor soon and that the construction industry can start growing again soon."

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