Tauranga Property Investors' Association

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Construction sector expects to rebound soon


Workers in the $12 billion building and construction sector are facing the toughest times in almost two decades but a rebound is being picked soon.

Figures from Statistics New Zealand show the severity of the downturn for this sector, which has crashed to new record lows. Latest building consent data for January, the weakest in 17 years, showed just 17,525 residential buildings got consent in the year to January, down from 30,000 in 2005.

The 49,331 workers in the building business have enjoyed 7.5 per cent growth rates since 2003 but now big job cuts, reduced hours and pitiful demand looms large.

But some people believe a change is imminent.

Graham Darlow, Fletcher Construction's engineering division general manager, said his firm would be watching the results from the Jobs Summit keenly and expecting changes.

"We're waiting to hear more on the Government's stimulus package, particularly for infrastructure, which we believe will provide further employment both on major national and regional projects."

BIS Shrapnel senior project manager Adeline Wong also expects the building sector to rebound soon because of strengthening economic growth, low interest rates, better home affordability, pent-up demand for apartments and houses, higher net overseas migration levels and a growing deficiency of housing stock.

The civil engineering sector would also provide a buffer to the construction sector, she said, due to increased spending on infrastructure amounting to about $5.8 billion in the next five years. That would result in the civil engineering sector expanding by more than 10 per cent a year during the two years to 2010/11, she predicted.

Brian Dackers, chairman of property consultants Rider Levett Bucknall, which issues an international construction survey, said Government and infrastructure might well save the day for the sector by providing some consistent workflow.

Some property development projects have stopped midway and others have been shelved as funding dries up. Cranes, harbingers of economic growth, have almost vanished from Auckland's CBD skyline.

Buyers have yet to materialise for the ghost-town-like $500 million Kensington Park at Orewa, despite Colliers International's prominent global marketing campaign. Mortgagee sale signs are springing up on blocks of land which developers are being forced to quit.

Lack of demand for timber alone has meant sawmillers have been hard hit and employers and unions agree that changes to working hours may be a workable solution.

Timber Industry Federation president Howard Tonge said last week that domestic sales of sawn timber were down to less than half those at this time last year. That industry alone employs about 7000 people.


"Probably half of the industry is looking at working reduced hours," he said. "All overtime has gone; four-day weeks are common."

Fletcher Building, one of the largest New Zealand businesses, has reduced staff in many parts of its business but is taking on more staff in other areas.

Jonathan Ling, Fletcher chief executive, said about 1700 people had been laid off from his businesses in the past year: 700 in New Zealand, 200 at Laminex in Australia and the rest at Formica in North America and Europe. Further layoffs are planned, plants have cut shifts and hours of operation, frame and truss operations have been rationalised and the ready-mix cement truck fleet has been cut.

Fletcher, which employs 18,500 globally, laid off 600 workers in three months alone last year and plans to axe a further 200 jobs at its New Zealand retail outlet chain, PlaceMakers, if the economy continues to deteriorate.

Yet some Fletcher divisions are taking on more staff, particularly in construction which has a $1.2 billion order book. Fletcher's Mr Darlow said many highly skilled Kiwis were returning to New Zealand and seeking jobs. They were coming mainly from Britain but also Dubai.

"We're looking for experienced people in construction, particularly engineers, quantity surveyors, foremen and site supervisors," he said.

This decade, Fletcher brought migrants here from Britain, South Africa, Germany and South America. Now, the business has stopped advertising because for the first time in eight years, it has more applicants than jobs.

"Land development has died completely so engineers, quantity surveyors and machine operators are coming from that sector. People are also still wanting to come to New Zealand from Britain because their market is in recession," Mr Darlow said of new migrants.

Big Fletcher jobs where the migrants or returning expatriates are working include Tauranga bridge, the New Lynn railway line, Mt Eden Prison, Eden Park and Christchurch's AMI Stadium.



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