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BusinessDesk: Building work volume sinks to decade low in June quarter

BusinessDesk: Building work volume sinks to decade low in June quarter

The volume of New Zealand building work put in place fell to a decade-low in the June quarter as construction of new housing sank.

Total building activity dropped 6.6% in the three months ended June 30, following a 6.3% decline in the first quarter of the year, according to Statistics New Zealand.

That’s the lowest level since September 2001, before the housing boom really hit its stride in the past decade, and was led by a 12% slump in residential property. Non-residential construction activity fell 1.4%. The value of home construction sank 11% to NZ$1.28 billion in the period, with new dwellings dropping below NZ$1 billion for the first since June 2002.

“A decline of this extent is surprising,” said Jane Turner, economist at ASB.

“Construction activity was already very weak, and we had expected construction activity to remain broadly stable given building consents had started to stabilise over the first half of 2011.”

Still, recent government data showed the number of new building consents issued has been rising in the three of the four months through July, suggesting developers are preparing to ramp up their work. The Canterbury earthquakes are likely to soak up a lot of the demand after causing an estimated $15 billion of damage to the country’s biggest city.

The value of non-residential building work fell 0.8% to NZ$1.15 billion in the June quarter, led by a 4.7% decline in new commercial building to NZ$310 million. Construction of new factories and industrial buildings climbed almost 50% to NZ$76 million in the quarter.

Turner said the result was much weaker than expected and knocked 0.3 percentage points off ASB's preliminary GDP forecast.

"We are now currently expecting 0.5% GDP growth over Q2, although we will finalise this number after the release of the Economic Survey of Manufacturing next week (13th of September)."

(Updated with more details from ASB)

Building work completed

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45 Comments

 “A decline of this extent is surprising".....bollocks

This is the normal building activity to expect in a very VERY long recession brought on by a few years of excessive credit based madness. Were it not for the tens of thousands of shoddy rotting buildings that will need reno jobs and replacement...along with the chch rebuilds...the building sector would be arranging its own funeral.

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And wait you will Hugh..fancy expecting the hidden costs rorts scams charges and thefts to be swept away at a moments notice..tisk tisk.

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"wE" Hugh?

Not all of us. Some of us are aware of mathematical and physical realities.

There's hope though:

http://thinkprogress.org/romm/2011/09/06/312811/hell-and-high-water-fires-extreme-conditions/

Maybe you can pick up a bargain at the firesale.

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Unfortunately to get anything done, Hugh, it looks like we'll have to do it ourselves.

I recently looked at some of the shonky little excuses for afforable housing that have appeared out at Delamain in western Christchurch.  If that is what planners and central government think the solution to affordable housing is we are all in trouble.

I am horrified that poorly designed houses on the most constrained sites on the verge of endless countryside, are destined to become the slum housing ghettos of the not distant future.

I genuinely believe that if you have the knowledge of how to achieve a good standard compact home for a low price then build a demostration house and promote it to central government to show it can be done.

Even if the land cost $100,000, and if the completed building could be finished for $130,000 you would still be demonstrating the point as a finished product costing $230,000 is still substantially less than any comparables in the market.  (Reducing land prices to anything below $70k per site would be hard work anyway).

Now this doesn't need much capital outlay perhaps you and Bernard could get together to build the "Interest.co.nz affordable house" maybe get some more corporate sponsorship too.

Show the Government that it can be done for a lot less than it cost to build their "starter home" competition winner.

The fact is that it wouldn't require a large capital outlay to do this - and given that the property is going to be cheaper than market value there would be a profit too.  In fact I could just do it myself, why don't you Hugh?

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That's a brilliant idea. I need a first home so put me down for buying it!

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See my post below Chris.

It could be further enhance by making it transportable/moveable to get around the building code. 

It would be nice to add some thermal mass in there, but I am sure that could be done:)

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I believe I am able to build at a price matched by very few others - But for $130,000.00 all I could build would be a dog box suitable for our next ghetto.

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Wolly, the thoght is attractive!

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Thing is Petrus...the option is there but requires a mindset not locked into the silly past and the dream of the quarter acre and the eventual capital gain, the grass to mow and the fence to paint, the neighbours to tolerate and the rates to pay.

Run the numbers to discover a truckhouse can be built by a competent person prepared to do the bloody work, for well under $50K...well under!. The running costs are road user charges and the COF bills, and the rest is down to use...fuel tires etc.

Parked up in a campsite long term would involve weekly rent for the space yes...but even then the weekly savings to be had are massive and if the job fall over you can bugger off to find work elsewhere. You also have the advantage of being ready to roll anywhere for the hols or the long weekend.

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"The Canterbury earthquakes are likely to soak up a lot of the demand after causing an estimated $15 billion of damage to the country’s biggest city."

Christchurch is New Zealand's biggest city???

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Sounds like someone's living in the past! 

Largest city?  $15 billion in damage?

Try 2nd largest.  $30 billion.

[Although I think technically it was the biggest city until Auckland supercitied itself.   However Dunedin is actually the biggest in geographical land area of any city council (it goes all the way to Middlemarch and Hyde)].

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I've read the 1950 Time article you referenced Hugh.

After reading it I think you need to be a little careful with those multipliers.

First, the median annual income for an employed male across the US was $2,570PA in 1950 according to their Census figures.  The houses they were buying in Levittown were 25 foot by 32 foot with 2 bedrooms (ie 800sq ft about 75m2), they had a 4.8m x 3.6m living room and they cost $8,000, there was the option to expand another 2 bedrooms into the attic.

So considering these were very, very modest houses, and that a house of just 1200sqft (with the attic) cost about $10,000 and the median income for all households is about $2,500 at the time, then the median multiplier is actually 4 not 2.1.

And here's an example 60 years on (and priced at US$269,000) or 6.5 times the median male income.  Not exactly enduring architecture or a quality living environment.

http://www.realtor.com/realestateandhomes-detail/4-Pond-Ln_Levittown_NY…

Production line housing can only reduce costs by certain amounts.  Large scale builders in NZ today who build hundreds of houses a year actually can't provide housing at much less cost than a private builder.  Fletcher's proved unable to do it, look at the Jack's Point fiasco of $800k houses:

http://www.flq.co.nz/category.php

Speaking of fiasco's this line from the Time article seems pertinent: "Near Norfolk, Va. they laid long, roadlike strips of concrete for foundations, then erected walls and roofs over them to form 1,600 squat houses that were little more than shacks. The development was a flop and about 230 of the units are now empty."

The Time article notes that the cost savings of the production line mass model is probably $1000 per house (12.5%) which is about the same as the developer's profit on each house.

So we are only talking small reductions in cost for having tract housing (which even in the 1950 article they discussed about being the future slums).

Now I'm of the view that it is impossible to develop sections below around $70,000.  Right now in Christchurch you can purchase sites where houses have been written off for what would be around the $70-90k market for a 300m2 section if subdivided.

So I don't see any need for tract housing which makes a large part of NZs failed suburbs (take a look at Otara and South Auckland, Heidelberg in Invercargill, Aranui in Christchurch or any state housing area). 

My view is that the pre 1930s developments worked better, where a developer may buy an acre or two and build six or ten houses in one go, all on decent size sites, with complimentary designs but with an attention to detail and quality.  Many probably don't even realise that their villa or bungalow is actually built by the same builder and very similar to their neighbours.

But back to my challenge, if you are so convinced you can build affordable houses, why not go out and build a demonstration, sections can't be created much cheaper and there's good demand for the end product.

It's intersting that in places like Amberley and Rolleston where there is substantial land already zoned residential that new sections are not being created because the cost of developing was too high and the pre Sept sales prices at around $100k were insufficient to turn a profit.

Having large tracts of land available simply isn't a possibility in cities like Auckland.  The land doesn't exist, and where it does it's not going to have an impact on sky high central prices, because people simply don't want to live an hour from the CBD.  Sensible land development is needed not a Texas free for all.

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I share your concerns about Levitt Chris.

I found out recently that his brother and designer Alfred was from the school of Frank Lloyd Wright. He was really only a devoloper interested in lining his own pocket.

Alfred knew how to build better houses, as he had worked on Wrights Usonian houses. He chose to turn away from the lessons learned at Taliesin and designed pretty woeful houses.

You see quality of construction is one thing, quality of the space is something quite different.

Hugh see the link to the house I built further down the thread.

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With due respect Hugh, while you talk about affordable housing I have already done it and lived it. 

As I state Levitt was a Frank Lloyd Wright failure. FLW was producing great housing for another 25 years after Levitt left his unfinished apprenticeship with him.

He was a developer that cared about his own pocket, not about the people that would have to live in his houses.

Try looking at Jorn Utzon's Kingo houses for a great example of quality affordable housing. Unlike our tacky housing market Kingo houses don't sell often because people want to live in them.

Keep doing your good work on breaking down bureacracy, and read Christopher Alexander to learn about quality housing.

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 "...they went to America to learn how to build cars efficiently"..bit misleading Hugh...an American went to Japan and taught them his concept which was not the way Detroit was building cars~!

As for waving the American housebuilding flag....it is perhaps acceptable if you deal just with California where the building code deals with similar problems as here. And not all of that state either.

I think you will find your best methods for cost and product quality in the Netherlands and Scandanavian countries...applied in a mirror manner to fit the north south NZ climatic extremes, although there are only a very few inland areas here that would come close to the extremes they deal with.

We have abundant supplies to support a plywood and structural composite wood industry. Much of NZ amounts to a slip waiting to happen, a quake waiting to hit or a flat waiting to flood. So any building planned now, demands ground engineering survey work that ranges in cost from a few hundred to the sky high areas.....then the 'authorities' demand engineered foundations....then they demand engineered structures...and finally after about six thousand plus gst, plus your architect too, you are allowed to build( if you have any capital left).

This is why the 'off the shelf' photocopy franchise plan pattern has developed to become the norm and anyone owning one has to look twice before entering in case they are in the wrong house. That makes it cheaper but ugly. To expect otherwise is foolish. That is how the market works. That is why we drive the same box on 4 wheels...wear the same crap clothing...etc.

Let's praise the scarfies of this world who say "feck that" and do it themselves. As scarfie learned and I also, you can do your own thing while also keeping costs down but only a very few are ever in a position to take that road to end up with a one of work of art. Many who would want to but are without the capital, go the truckhouse route, the hippie lifestyle and that should be encouraged.

 

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Hang on Hugh....'value on the fringes'....you're adamant the buggers hike res prices by fencing in res right.....they may be doing it to block urban spread over arable soils..and/or produce greenbelts to enhance town and city life...

 "finance infrastructure properly"......oh you mean make others pay to keep it cheap for buyers!

  "that tells us something about consumer preference."...of course it does but not why the decisions go that way!

Other than that I haven't a clue what the hell you are on about...

Oh right you're on about cheap housing....how cheap?....I see land can be bought for under $90K in parts of Blenheim...700sqm plots fully serviced...ok they are not the best but hey...and a franchise box for circa $180K....That's an all up $270...double glazed and all...

 

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This is only the beginning of a very deep decline and it certainly hasn't happened overnight.

No matter how you dress up the data over 2000 kiwi builders are now working in NSW and Qld, so they are not here in NZ.

New Zealand Statistics state that as a country we need to build 20,000 to 24, 000 homes per annum to keep up with population and the rate of decay of the current housing stock.

2009 16,000 homes

2010 15,000 homes

2011 13,000 homes

plus in Christchurch we are to pull down 15,000.

The industry has been ignored, the average first home buyers age is now 36 and it takes 6 years to save the average deposit.

How many Building companies had a Govt Guarantee? How many banks and finance companies.

if I hear one more economist tell me houses are going to crash, dont leave the nail gun out.

Are Bricks going down, windows, doors, concrete, tin,pipes, cable are builders taking a wage drop are delivery companies dropping their prices ,no not one of them is reducing in cost.

The lag for developments and building is substantial it's not like making lightbulbs, you dont make 30,000 overnight.

If you think houses are expensive today they will be more expensive next week and the week after.

Also just because there are consents don't mean they all get built a myriad of problems occur.

Get ready to take a number and pay a premium, we are in for a long term housing crisis New Zealand.

Home and Housed reports and the productivity commission enquiries aren't building houses, we know the problem, houses arent getting built in enough numbers, even Bollard worked that one out.

Residential Construction Finance is as rare as Rocking Horse S%$ & cheaper from the Corleon Family.

Most houses being constructed for the past year are for resident owners, how many rentals do you think are being constructed?

Kiwis are leaving in their droves, after 18 months in Australia you are entitled to a first home owners grant (glorified GST rebate) a $350k NZ home contains $45k of gst.

Didnt happen overnight

 

 

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Right there, MCNZ, in your statment "Kiwis are leaving in their droves" is just one of the reasons why there is not, and will not be, a shortage of properties on New Zealand. We do not need any more houses, as everyone went to bed in one last night. As the velocity of movement slows, and people stay-put ( either in their houses or the young stay home with M&D before they go overseas or pair -off or multi-share) the need for additional houses falls, and a surplus emerges. Immigration is not needed ( a primary driver of past 'need') as we have a too high, and increasing, unemployment problem that isn't going to be solved with just an increase in housing. That will make it worse, and your 'kiwis leaving' will turn from a trickle, into a flood. More houses, or an increase in the price of same, is just going to increase the amount of debt that New Zealand has; a debt it can ill afford. The future must be more efficient use of what we have ( get all the empty bedroom filled!) and as HP advocates, a cheaper supply of houses - ie: the land.

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Yep. 

We could easily double our density with the existing stock.

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Surprising, bollocks jane. If you got out of your bank office and knew anything about the industry then this would come as no surprise. Thats why i, m in aus. Saw this coming and trust me the malaise will last a long time yet

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I designed and built this in 1999. 

http://www.flickr.com/photos/67388320@N08/6127761029/in/set-72157627501702217/lightbox/

147m2 plus a futher 67m2 shed/garage.

While not fully completed it cost $45K for the house and a further $20K for site work such as the driveway, power, retaining and water tanks.

If set up in a production  you could build them in about 5 days. I am a bit out of touch with costing, but for cheap pleasant housing it would be hard to beat. I lived in it for 10 years.

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 Scarfie – interesting concept - can you please, send me more photos/ information by email – thanks.

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Well done scarfie...of course you had some help didn't you...like you were not without equipement, skills and contacts...and these days with the extra gst and the amount of red tape and taking into account the debasement of the currency since 99...ie about 35%...and looking at it from the average family perspective...it would run to oh about the same cost at a cheapy box from one of the big franchise building firms...

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Actually Wolly I had bugger all to start with and it was a steep learning curve. I worked very hard to keep the robbers out of the project, hence did most work myself.

For instance the power company was going to supply and install the pole for the power. Cost of 11m 150 sed pole from them $572, cost from the pole yard $230. I actually hired a ditch digger and laid my own cable in the end. Total cost of power was $7K.

The only contracters were the earthworks at $6K, and the sparky for a couple of hours.

More to come, but I have a customer here to uplift one of my IntensiFire's:)

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You mis understand me scarfie..I said well done..I was just pointing out the same options to keep costs down are not there for all. As well I suspect you are in the winterless north....try 5 degree frosts...!

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As well is the savings in construction material, the half round design makes for a better surface to volume ratio. With 90mm of poly insulation it is like a chilli bin inside. A bit of mass behind the north facing window and you would be very thermally efficient.

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Wolly I also completely challenged conventional design construction methods ie the cost of materials and construction. The half round design brings about a 40% savings of material for anything above the floor and excluding windows.

There was actually only 5K in timber and 7k in plywood forming the bulk of the construction material. Floor and walls are lined with ply, which makes for a very pleasant environment.

You are right about the red tape I fear, but this would be cheaper and nicer to live in than most homes. 3.4m stud in the centre and wonderful light when orientated the right way.

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Depart from conventional and you had better be a structural engineer scarfie....the red tape even before the chch events was massive...it is now killing the industry.

The least costly is often that which avoids the bureaucrats and for some young and small families the best option is the big old bus with the roof raised and parked up on a friends farm out of sight of the council (which means under the pines as well).

Option two would be the big old converted powered barge and lying at anchor alongside the riverbank by a mates farm with no access for the council bureaucrats.

 

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It would actually perform very well seizemically, as a bit of movement wouldn't hurt. The plywood cladding means it is braced to buggery and the ply floor makes for a diaphram. On a good slab it would be dynamite. I did have a few issues with the council, but got it through when I switch to one of their regular local engineers.

But I agree with your sentiments.

A barge woud be cool and I often turn my designers mind to a cheap house boat. How about a couple of spiral welded pipes, say 1.5m diameter, for a catamaran houseboat?

I can only hope that the bereucracy will break down and people will build shelther in any way they can.

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I think someone did a concrete one....(houseboat).....but a fibreglass over insulation would work....now if you put that on a river pointed upstream and had a waterwheel driving an alternator aka the old flour mill barges, hey presto power...several  kws' easy....

 

regards

 

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Just a windsock like design in the style of a sea anchor with the turbine at the small end. Any time you boat is anchored you throw it over the back:)

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Great idea scarfie..now try to find a river free of bureaucratic coppers...fat chance....I think the housetruck is a better option..

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hmm....depends on the speed.....mass...water depth (enough) also [semi-]floating rubbish but yeah thats sounds neat.....but a simple to look after a waterwheel is hard to beat...

regards

 

 

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The design would probably require approval as an "Alternative Solution" , & a fortune in engineers costs . Good luck & God help you - take about two years, badly raised blood pressure & the tolerance of a saint to get it through. Other than that, looks like a great idea.

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It shouldnt take much structural engineering oversight....Im pretty sure the framing would be made to meet the standard easily and then the plywood paneling throughout would make it bomb proof.

 

regards

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Great work scarfie.  Would love to see some clearer pictures.

But, as you say, it was designed/built in '99.  Input costs have practically tripled sense then depending on region.  Only if land costs, local govt costs etc come down does it become fiscally affordable.

In addition housing has become part of materialistic consumption where it is no longer a basic need of shelter and self sustainability.  It has become a "keeping up with the Joneses", a show of "wealth" and image.

I've always fancied designing a house based on the old log style cabin and keeping it as simple as possible.  Like you say for cheap and pleasant housing it would be hard to beat.  Unfortunately it also requires a certain mindset, mentality and attitude which I fear no longer exists in the general population.

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But "traditional" houses have also gone up.........

"Keeping up with the Jones's" I suppose it depends on your view point.....as a piece of art, low cost, effective  and practical I just love that house.....I'd build / buy it myself.....my wife wants another floor on the house.....maybe I will do it like that....

I think also attitudes will change, the BBs are now passing...so their attitudes and morals of gross consumption is will as well.  I think Austerity will be the name of teh game for the next 50 years....McMansions are history IMHO....

regards

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"my wife wants..."..............."their attitudes and morals of gross consumption".....have a look in the mirror steven...

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Nah Petrus, you just need a Civil Engineer who has gumption.

It helps if you do the calcs yourself as a starting point, but anyone should be able to do that.

Get yourself a Producer Statement, backsides are covered, end of story.

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I already have the producer statement from these guys. Although it would probably want updated.

House is still standing and withstood the gale back in 2007? or was it 2008. Anywas there was 200km/h measured locally, and a peak of 205 at Tiritiri Matangi. Being an Easterly I was very exposed, almost sucked a window out. Lol.

Shed got flattened though, but that could be easily remedied.

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round also wouldnt give a "sail" for the wind to push against....

Ive seen windows flex before now in a strong coastally....I decided that if that did blow out the guy's kids would be a red stain on the carpet and opposite wall....decided I didnt like the idea of such a huge pane....think it was 3m x 2m or something....

That house looks great btw, lovely shot....

What are the basic dimensions? (width mainly).....

regards

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Lift was actually the main problem:-P

It was never engineered as a whole, just each portal frame. Accordingly none of the walls were used to brace, but this could be done. 

With the groin vault it was significantly stronger than expected. On the diagonal it spans 10.2m with only 4x2 framing!

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Well done Scarfie, and all the others on the forum.

Why is it that 10 people or so can highlight 90% of the regulatory problems and cost gouging yet an entire Government and departments are preparing another Million Dollar report to identify the issues that are defined by the above comments.

May i suggest ,that if you want ,go to the productivity commission website and post a submission on Affordable Housing, as i have and be brutally honest as many others have.

even the big boys have laid it out, 4 years average for regulatory period for a subdivision 5 months to build it. More expense in planning than construction......

you guys know the rest .........

 

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There's a brand new movie out, just for the Hugh types.

It's called Cocoanuts.

Marx Brothers, circa 1926.

All about the Florida land-grab (sans Trash Mountain).

Coming to the Cornucopia Theatre, real soon.....

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