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Following the recent Auckland Trade Me’s Business Event, our construction consultants Kathryn Evans & Carol Kelly share the interesting discussions about the pressures facing the Auckland Construction industry
Throughout our breakfast with economist Bernard Hickey, the hot topic discussed was infrastructure and housing. Immigration is increasing pressure on New Zealand’s infrastructure. It is estimated that New Zealand needs to spend around $100B over the next 10 years on housing, rail, hospitals and schools just to keep up with net migration. Yet our extremely high immigration numbers aren’t the sole cause of the challenges we are seeing with housing prices and building productivity. This problem is also the result of a bigger untold issue. During the GFC, fewer houses were built in Auckland than the number built during World War Two. Auckland essentially stopped building enough houses since the mid-1970's.
We are now seeing prefabricated housing and the Kiwi Build Scheme being implemented to assist with the huge housing demand, using local companies, materials and consistent subtrades. Although this results in less margin for contractors, this does mean a consistent pipeline of work and the use of factories to prefabricate, also eases the impact of the current shortage of on-site personnel.
Auckland's population has grown rapidly. In the last 3 years alone, our population grew by 150,000 people! Labours Despite this, many industries are still in dire need of staff which they cannot find locally and cannot upskill at a fast-enough rate. To sustain themselves, they require skilled workers from overseas.
This population growth is corroborated as we see a huge surge in cars on the roads, with an extra 270 cars entering Auckland every day. It’s also interesting to see how those extra vehicles reflect the economy with the top two vehicles of last year being Utes; Ford Ranger and Toyota Hilux respectively. Again, no surprise there as construction is still in full swing with 73 cranes still seen in Auckland and 13 in Wellington at the end of Q4.
Investors will need to be smart over the next few years ensuring they are supporting attractive developments and margins that are practical for profit. As we are starting to see a shortage of land there will be a strong continuation of vertical growth expanding suburbs into high rise developments around marinas, coastal areas and within town centres - which may affect the kiwi dream of house and land packages.
Auckland construction is most definitely under immense pressure to complete current projects and prepare for the future growth. Our government has and is committed to help deal with the over-flowing main centres of NZ, all of which are lacking efficient public transport means and affordable housing.
Cobalt is a successful Recruitment firm focusing on the construction, property, engineering, architecture, legal and finance sectors. Our consultants are seeing first-hand the pressure on resource and the shared strain companies are facing with the productivity expected in the coming years. None the less we persevere with successful candidates and clients who take pride in their careers and development here in New Zealand.
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