Construction projects may be delayed for several months as civil contractors prioritise emergency flood repair work, and Westpac is warning construction costs will stay high as a result of increased demand triggered by Auckland’s storm.
Auckland University of Technology professor of construction management, John Tookey, said civil contractors have emergency contracts to clean up damage which supersede current work in events like Auckland’s record-breaking rain which has wreaked havoc on the region.
Fixing land slips with heavy equipment such as rollers and excavators and “flattening down slopes” will be a priority for contractors so they don’t get worse, Tookey said.
“But you’ll end end up with a whole bunch of potential delays [to projects] bolted in as a result of the groundworks contractor not being on site because he's fulfilling his emergency contract requirements.”
Tookey said building sites will also need work. Excavated sites can fill with water and need to be pumped out or can be damaged. Sites in the latter stages of construction would be easier to sort out and could potentially be fixed in about three weeks.
“It kind of depends what stage the site is and how exposed the ground is. How much erosion has taken place, how much intended excavation has occurred, and so on.”
He said delays on construction projects are inevitable as a result of the severe flooding, but how long the delays would be depended on further flooding and damage from more bad weather.
Red stickered
More than 70 properties in Auckland have been red stickered by council inspectors, meaning they are not safe to enter. A further 318 homes had been yellow stickered, which restricts entrance to the property to limited times.
Auckland Council has cancelled booked building inspections for Tuesday and Wednesday, and said it might have to cancel bookings for Thursday and Friday as well.
Building consents general manager Ian McCormick said in an email that “the situation we are facing left us no other option”.
McCormick said inspectors had been urgently conducting rapid building assessments across Auckland and there was only a small team of inspectors available for "urgent or essential" work.
“I realise how disruptive this situation will be for the industry, and that you yourselves are probably having to deal with storm damage that has affected your own homes and construction sites.”
People who have had inspections cancelled would need to rebook.
McCormick said 1350 buildings had been assessed for storm damage in two days and there were thousands of flood-affected buildings that needed to be inspected.
“Some of the damage we are seeing is heart breaking, there are hundreds of displaced families due to unsafe or insanitary houses out there."
Inflation warning
Westpac senior economist Satish Ranchhod said the storm and resulting destruction would mean construction cost inflation stayed high. He said the construction industry had seen large cost increases with 17% annual inflation, and “that pressure would remain”.
“There are already a lot of projects in the pipeline.”
CoreLogic's Cordell Construction Cost Index released in December showed the cost to build a standard home increased 10% in the final quarter of 2022, breaking the previous record of 9.6% in the third quarter of 2022. Home building in Auckland has also been pumping, with average new home completions in Auckland running 32% higher than they were pre-Covid.
The Westpac economist said while the initial cleanup would be disruptive for the region in a few months activity would recover, and pointed to the example after the Christchurch earthquakes.
Some people wouldn’t come through it without taking a hit, however.
“We'll still see a number of households taking a big financial knock, the damage to their houses and also the cost of replacing items. A lot of that is covered by insurance. Not all of it will be, and there will be many households who don't have insurance covered."
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“We'll still see a number of households taking a big financial knock, the damage to their houses and also the cost of replacing items. A lot of that is covered by insurance. Not all of it will be, and there will be many households who don't have insurance covered."
Now, if we didn't have all that credit creation to bid up the price of the existing housing stock, arguably there would be less of an onerous financial burden on individuals in this situation. But the 'clever people' who decided that we should dilute our money supply for our 'economic model' didn't really think this stuff through. In a 'rich' society, costs in terms of labour exchanged and finanical resources needed should be going down, not up.
Is there anything you don't want to pin on the 'housing ponzi'
The Ponzi is directly related to credit creation. How credit is allocated (productive / non-productive purposes) is important. And credit creation is essentially inflation. If that's what the country wants, that's fine. You just have to accept the trade-offs. As we're seening now.
A boost to GDP on paper but bad for the economy in the long run due to the disruption. Christchurch rebuild is old news, the most recent response to a crisis taught us that we're good at crisis management but pathetic at post-crisis socioeconomic recovery.
Less than 3 years ago, the Labour-NZF government were selling their Covid recovery plan as a once-in-a-generation opportunity to build back better. Shovel-ready projects, reinstating Ministry of Works, tourism for the rich, higher wage migration - all vanished in thin air along with the billions wasted on branding exercises.
Jones said tourism and international education would no longer be major industries for New Zealand. He believed manufacturing and other forms of industrial production based in the provinces would pick up the slack - Yeah nah!
It’s going to both give and take away from the economy. Some businesses will be wiped out by this. And households.
It’s also going to significantly disrupt residential development projects, due to damage to sites, increases in costs and exacerbated labour and supply issues.
There will be a short term (next two to three months) boost to tradies and suppliers, but this is likely to lead to bigger issues later in the year.
So maybe it’s August Day rather than May Day.
It’s a very bad time for insurance companies to be throwing new money into the economy. The short term gain for some will cause higher interest rates for others.
It seems to be the NZ golden rule: the property industry will always win while everyone else gets shafted.
You have to remember that you as an individual do not matter to a Command and Control Govt.
This is a disaster Labour Party (pun intended). Purely reactive and then they chose the wrong option.
As Lord Farquaad famously said, 'Some of you may die, but that is a sacrifice I am willing to make.'
7-House-Luxon is a bit of a climate funster, today he seems to be saying - 'yes there is climate change, yes it is responsible for all this local carnage but we no we do not intend to have a meaningful policy to do anything about it'.
It must be everyone elses problem then.. National seem to thing in NZ we shouldnt take our eyes off Luxons personalUtopia -> being higher property prices and tax cuts for the already wealthy.
Go Chippy!
JimboJ,
I don't wish to be overly pedantic, but You simply can't say that this rain event was purely down to climate change. What you can say and what climate scientists say, is that these natural events are being ramped up-made worse-by climate change.
Here is a quote from Lisa Goddard, director of the International Research Institute for Climate and Society at Columbia university. "When i look at at any of these events and see the headlines, it's almost always a situation where the disaster is caused by natural variability...and the climate change part of it is making it worse".
Of course, as climate change intensifies-as it will as we continue to pump ever more GHGs into the atmosphere-then the time will come when climate change becomes the primary driver of events.
im not sure that you can pin this on climate change... how about the 13% increase in atmospheric water content since the tongan volcano... it has to come down somewhere..
this volcano has also changed the wind patterns around Antarctica which is allowing more tropical weather to reach us.
What will you do with your money? Send it to Australia to earn 4% or leave it here at 15%? More importantly, what will they do with their spare cash?! Answer: They'll BUY the NZ$ and invest it here. What we then have to do is apply those funds appropriately.
A higher OCR isn't designed to actually 'control Inflation' per se, but to allocate Debt to the most productive area of the economy. One well away from non-productive asset speculation.
We actually have all the Debt we need, but it's in the wrong place. As JC writes above, if we had property prices at much lower levels than they are today, then we mightn't be facing what we are. But we don't. So, one way or another, we have to divert our Debt to (re) nation building.
Good ol' Kiwi company from Christchurch could do that for you in a jiffy. And...they have an operation in... Brisbane.
If Govt had any sense, they would be sat down with the big building firms, and building materials importers and wholesalers and 'offering' a partnership to ensure that construction costs and bottlenecks are appropriately managed over the coming months. Whilst a greater volume of work might lead to some inefficiencies and increased costs (e.g. recruitment), there should also be some economies of scale (e.g. bulk imports of key materials, which Govt could potentially subsidise). Inflation is not an inevitable outcome of higher demand - if you get ahead of it.
The inflation in construction is gouging. Cost increases are what trades are able to extract from those who pay. Now that sell prices have dropped projects have been crushed and are not going ahead. They are killing their own businesses. It is pure greed. Quotes vary by 120%. Good-bye to the overcharging ones and the disorganised ones.
Pushing out/cancelling inspections leaves some developers wearing costs of over $2,000 per day. How many developers say enough is enough and all of their very slim profit turns to loss.
And the work of council has been shocking. Buyers of recent builds beware.
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