Residential construction sector cool-off reduces opportunities for workers

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The number of new homes consented in July was down 25 percent compared with a year earlier.
Photo: RNZ / Dan Cook

The jury is out on what the slowdown in the residential construction industry means for the hundreds of thousand people working in the sector.

Industry insiders say companies are pivoting to renovations and additions as consents for new builds fall sharply.

But some staff were either being let go or farmed out to other firms.

Statistics NZ figures show there were 3058 new homes consented in July, down 25 percent compared with a year earlier. That follows a declining trend for each month so far this year.

There were 295,000 people involved in the building and construction sector in New Zealand, according to a Ministry of Business, Innovation and Employment report from last year.

New Zealand Certified Builders chief executive Malcolm Fleming said change was in the air for its nearly 3000 members.

“Those builders who have been working exclusively in that new home area are having to look elsewhere for their work and so that could look like, and is looking like, that those who have been contracting to group home builders starting to explore opportunities in the additions and alterations market and looking at opportunities in regions affected by floods and cyclones.”

Group home builders were the branded operators specialising in new builds.

Fleming said with the sector coming off record highs, jobs were going.

“For those companies that don’t have forward workload, yes, they will be letting go some of their people.”

For the year ended in July, there were 43,487 new homes consented, down 14 percent compared with the year ended July 2022.

But that number was still considerably higher than any 12-month period before 2021.

The Specialist Trade Contractors Federation represents tradies ranging from scaffolders to plasterers to electricians to plumbers and many more.

Its boss, Richard Arkinstall, said some businesses were starting to feel the pinch, with subcontractors losing business and laying off staff.

But he reckoned that had to be understood in the context of where the sector had been.

“The market has gone from an insanely high level of activity coming down to a more manageable level of activity.

“Now everybody gets a bit sensational and says ‘Oh the market’s dropped, the market’s dropped’ but actually have we just plateaued down to a level where it’s a lot more manageable for companies to deliver the work.”

On Wednesday, CoreLogic released its latest Cordell Construction Cost Index which showed the residential construction sector was continuing to slow down.

Costs rose by 0.5 percent in the September quarter – the lowest jump since the end of 2020.

Chief property economist Kelvin Davidson said most builders were still well placed.

“Some firms may be coming under pressure, but if anything the industry has been running beyond capacity and so it’s just slowing down to some kind of normality.”

Davidson said new builds would not get cheaper, but construction cost inflation was slowing down.