21 Oct 2019

Construction sector more confident than surveys reveal

From The Detail, 5:00 am on 21 October 2019
Construction site for the SkyCity Convention Centre in Auckland.

Photo: RNZ / Claire Eastham-Farrelly

The headlines are full of doom and gloom about the tracking of the economy and downward trending business confidence.

But why? Interest rates are at record lows, building in new houses in Auckland is expected to grow from $8 billion to $12b in five years, and unemployment is at 3.9 percent – an 11 year low.

The construction sector is swimming against the trend of pessimism, in spite of the collapse of some companies and huge losses by our big builders such as Fletchers.

The New Zealand Herald’s property editor Anne Gibson took The Detail’s Sharon Brettkelly on a mini tour of Auckland’s central city, a city which still features a skyline peppered with cranes.

“Ten percent of the workforce is involved in construction and a $39 billion annual output at the moment – it’s really quite phenomenal. Just living in Auckland … there are tremendous employment opportunities in the sector at the moment.

“It’s running at record levels – there’s never been anything like it in Auckland before.”

Gibson should know, she’s been covering the industry for 45 years.

Today she gives us the inside running on what’s going up, where the badly built buildings are, who’s in litigation and where the next big exciting development is taking place.

APEC is coming to Auckland, and the city will have to house some of the world’s biggest security risks – including the leaders of Russia and the USA.

They’ll be in the SkyCity convention centre, which is still under construction.

“SkyCity have got in there all sorts of fancy gear to be able to lock this all down, keep it secure, and bring in heads of state …. they’ll be driving in convoys down Nelson Street, and going in there – there’s massive turning areas for vehicles and separate lifts and lock-down areas and that’s been built with a lot of security in mind,” she says.

The build though has been a disaster for Fletcher Building. Losses on the convention centre contributed last year to a huge plunge in profit – of 80 percent.

“A $703 million dollar building had cost Fletchers $800m to build. And that’s one of the problems with the construction sector – builders signing contracts for amounts that they can’t complete the buildings for.”

Gibson says everyone asks her how builders can go into liquidation in a building boom.

“The worst time for any builder is a boom,” she says.

“You’ve got massive cost escalation, you’ve got inflation in the sector, and a sudden shortage of labour.”

At times the industry is relying on quantity surveyor estimates that, by the time building begins on a project a year after costing it, have grown by 100 percent.

Gibson says while we report about the failures in the sector – and some of them are big –  there are actually very few of them.

“What we don’t say every time we write a story about Mainzeal’s massive failure … is that Manson’s have got a forward order workload of a billion dollars plus. We don’t say that Fletchers have got a $1.4b order book on at the moment.

“It’s giving a somewhat misleading impression of the entire sector, which is rocking along at record levels.” 

Correction: in today's podcast Anne Gibson slipped up in naming the artist behind the fabulous forest panels on the new International Convention Centre - she is Sarah Hughes. 

Photo: RNZ