An 80% to 90% slump in inquiries for new house builds because of rising interest rates and concerns about falling house prices is feeding fear of a repeat of the boom-bust cycle that has killed past attempts to improve the construction industry’s productivity by transforming its structure, technology and training.
For years, the boom-bust cycle in house building has dominated the cadence of our economy and stopped our splintered, sub-scale and high-cost house-building sector from investing in the new technology, scale-building consolidation and training needed to improve productivity, and, ultimately, improve housing affordability.
The busts in those cycles in housing are acknowledged as the main reason why so many builders and tradespeople prefer not to make permanent hires, prefer not to bring on apprentices and prefer not to invest in scale, technology and systems that would allow them to build many more homes faster and cheaper. After all, why invest in expensive capital and training when there’s a high risk you’ll be stuck high and dry with equipment mothballed and highly-trained staff leaving to work in Australia as soon as the bust comes.
That’s what happened in 2009/10 after the systemic collapses of retail-funded property finance companies and the Global Financial Crisis. Building consents collapsed to lower levels per capita than during World War Two and the Great Depression and an entire generation of just-trained apprentices and subbies jumped on planes to work in construction and the mines in a booming Australian economy through 2010 to 2012 (thanks to China’s massive buying of iron ore and coal to fuel its own infrastructure surge unleashed to combat the GFC).
That knowledge and capacity just went. The hope in the 2010-20 decade just completed was that a rebound in the housing sector could be sustained, in part by the Government providing a strong baseline of building demand through Kainga Ora and Kiwibuild, and as bigger firms able to build more complex higher-density projects built up their balance sheets and were able to ‘build through’ the ups and the downs safe in the knowledge they could handle the buffeting.
The bust is coming
We’ve already seen a collapse in residential building intentions in the NZIER QSBO and ANZ business confidence surveys earlier this year as the easy and cheap credit dried up from November onwards, which in turned dragged down house prices from the peaks and reduced some of the incentives to buy off the plan and flick them on for capital gains, tax-free or otherwise.
However, on Wednesday morning Carmen Hall reported for the NZ Herald-$$$ from interviews with builders large and small that inquiries for new builds have crashed 70% to 80% in recent months.
"We know from nationwide sales data across a lot of our members, that there's been a decline in interest and a decline in demand of between 70% and 80% over the past six months. Those numbers are eye-watering. This is going to wreak havoc," said Master Builders Association national vice-president Johnny Calley.
Classic Group director Peter Cooney was quoted as saying sales were back down to levels last seen in 2008 because of tighter credit and uncertainty about interest rates. He has been through four boom-bust cycles.
"Workloads are still strong from last year's sales but going forward in six months it will be a whole different ball game. There is going to be some real hurt coming in the construction industry," Cooney said.
"This one has been a lot more sudden than we expected. I would anticipate that it will last until such time as interest rates begin to decline again which will be when inflation is under control," he said.
Interest rate rises and still-very-high house prices were also blamed by others.
"The biggest uncertainty will be how long the cycle takes to turn around. The biggest challenge will be how to bring new housing back to an affordable level," said Venture Developments director Mark Fraser-Jones.
New Zealand Certified Builders CEO Malcolm Fleming was quoted as saying his members had 12-24 months of work lined up. Housing Minister Megan Woods was quoted as saying she was engaging with the sector on the issue.
A dream dying at birth
Meanwhile, there have been reports via BusinessDesk-$$$ in recent weeks from leaked internal documents showing Kāinga Ora has frozen new hiring and building plans because of concerns about cost blowouts now and the long term debt outlook with the new higher interest rates.
The long-held dream of lifting the base of house-building demand to a dependable and relatively high drumbeat to encourage the creation of larger-scale builders of more complex medium density homes may well have just died at birth.
‘Engaging with the sector’ is a long way from saying the Government guarantees to buy 15,000 affordable medium density homes per year. At present, those numbers are in the low-single-digit thousands, and remain subject to the whims of individual ministers and Governments.
Again, the 30/30 maxim (no more than 30% net debt and taxes being no more than 30% of GDP) is holding the Government back from providing that assured multi-election-cycle demand that the scale builders will want to see before they commit to the scale, technology and skills development needed to make those investments pay through the cycles.
And, of course, the failure to improve productivity much has helped drive the latest burst higher in construction costs (chart below of housing cost inflation in Monday’s CPI data) because of a surge in demand without the capacity to respond.
Twas ever thus.
124 Comments
"Workloads are still strong from last year's sales but going forward in six months it will be a whole different ball game. There is going to be some real hurt coming in the construction industry"
Say that order books are filled to end of this year. By Jan, the crazy years will be over, tradies can't name their price, developers no longer build to hold. Investors take a break and enjoy their earnings/ cut their losses where bets were doubled.
Sure, many house owners believe in a valuation of no less than RV, and that holding is better than selling in a weak market. Not maintained ex rentals are the first to go, I suspect.
Pay $750,000 for an ex-rental in Wellsford is no longer attractive, not viable for the business minded, who do their math.
Investors and house owners can look forward to a new wave of migration and economic recovery
Anecdotally an architect friend in Auckland doing a lot of small townhouses for Chinese developers said in June they are crazy busy, busier than ever in fact. Suggests a lot of these guys haven’t quite realised and adjusted to what’s happening in the market. Definitely going to overshoot. Glad they’re still going for it though, the more oversupply the better.
Would be interesting to know whether the architect is doing designs for 'consent and flick' projects (ie. get resource consent for a site, then sell, for a much higher price with the consent - much much harder to do now in this economic climate), or 'real projects' (ie. a project the owner/developer genuinely intends to build)
In my experience, a lot of Chinese developers do the former.
In this environment, that doesn't mean anything for houses getting built, building companies staying afloat etc.
The more oversupply, the better? Do you realise we may be facing an economic crisis of unseen dimensions in New Zealand?
Our Reserve Bank had lowered the official cash rate to 0.25%, causing a housing market frenzy. Now that many owner-occupiers and investors have bought at that level (low interest rates and high purchase prices), the Reserve Bank is trapping these people. They are caught with massively rising interest rates, as our Reserve Bank has increased the official cash rate tenfold to 2.5%. As a result, house prices are falling, and the people who bought at an OCR of 0.25% are now trapped, as they cannot sell with negative equity, and they cannot afford the massively rising mortgage costs.
Do you really think this is "better"? Do you realise how much hardship the Great Depression of 1929-1932 caused? Do you realise how narrowly we escaped such a scenario in 2008, and do you realise what might be at hand now?
So whats the alternative? Keep selling houses to each other at ever increasing prices and making the rich richer and the poor poorer or do we have a reset and stop the greed (yes there will be collateral damage of course while prices go down - just as there was on the way up).
The alternative is that we realise that one man's crisis is another man's opportunity. A crisis does not affect everyone the same. For some it is just horrible. Others in a different financial situation can and will take advantage of their problem and make it their opportunity. And life goes on. I have had to shut down three of my businesses over the last forty something years, losing the money that I put in to them, but I am still here, with two businesses on the go at the moment, both with great potential, and actually making money at present as well. When anyone says crisis, I and a lot of others, smell opportunity.Plus we have a lot of fun in the process as well.
Aren't we forgetting something. Building is about to get a whole lot more expensive, due to new code requirements. Add that effect, and you will have a double whammy. It won't just be the builders looking for a job driving buses, add in the real estate agents, and their hair dressers.
Ha… classic!
I just spent an hour looking at houses online. None of them have prices. What a racket.
At some point the agencies are going to get sick of this game. They will need to force vendors to put a price on it or auction with known reserve.That will get the turnover they need to stay in business….albeit at lower prices and I dare say lower commissions.
If they don’t then the market will more than stall. And there won’t be a need to build new houses. I also read on one roof of a typical agency has 90 listings and another 50 not shown because they don’t want them to get stale. The stockpile of inventory must be getting pretty high.
with OCR now looking like it go over four, five or six then you double that with stress testing and bank margins.
looks like market crash of epic proportions is on the cards.
as someone pointed out we won’t even make the runway at this rate.
brace,brace,brace
It might be the area you're looking in. I've been following property in a medium Canterbury town about 30 minutes out of Christchurch for a couple of years, originally with a plan to move there. We saw the market change dramatically, RE agents move towards no price selling/auctions, massive price escalation etc. We put in a couple of offers early last year but were always over $100k behind the curve & eventually said this is crazy, we're not playing this game.
I keep an eye on the area & maintain a watchlist of similar properties to that we were looking for. I've seen through this year that time to sell has trebled (some, esp. poor quality/needs work, now don't sell in months & are taken off the market), there's a lot less auctions (from 75% down to 25%) & over the last 3-4 months asking prices are listed on at least a third of properties & have already dropped back at least 10%. Now starting to see properties price changes with "reduced by $100k" as reality bites.
A house at Hill Road in Manukay went for Auction and the real estate agen was tempting with feedback of $800000 to $850000 (was surprised as the vendor had bought for $950000 at Peak in December 2020) and the reason for selling in loss was that vendor has already booked flight for Australia so will sell at best available price, still no one attended the auction and than they put asking of 1.2MILLION.
Really no one to buy for 800sK ........and now..........
Many RE do not have shame or maybe so use to lies, fibbing and manipulation that have lost basic moral and social value (Though vendor has a right to sell at any price but from $800s to 1.2Million is too much to fathom specially in this market)
Some are now delayed til May 2023; some to be implemented November 2022. Add to that that for all practical purposes all builds now need a waffle/ribraft foundation design - adding not less than $10,000.00 - $15,000.00 to a modest size build. Why ? No one really knows, as there is little to no evidence to support it
The answer is literally staring Govt in the face. Create a 21st century Ministry of Works (made up of direct employed tradies and quality assured building companies working on a 3-year exclusivity deal) and build high density affordable / social housing for rental and the infrastructure required to support it - at scale. Do a cost + margin deal with the building materials suppliers, approve a limited number of competition-winning designs, and get moving. Once the building work has momentum, compulsory purchase rental properties that don't meet warm home standards and replace then with more high quality housing, and build high density student and essential worker (nurses) homes in the cities.
On the ridiculous 'can Kainga Ora borrow any more' point. Just repeat what we did in the late 1930s and 40s, when we, errrm , built thousands and thousands of home because RBNZ directly financed them. QE without the rich people get richer side-effect.
Agree with this for social housing as long as the accomodation supplement is also removed. As far as govt building programs to build to sell, forget it. We will get the wrong house, in the wrong place. Govt workigng groups have too many vested interests and committees are too removed from the market. They definately need to do a Canterbury on land supply in areas where labour shortages are strongest to make these areas affordable to re-locate to.
I don't know if the govt is capable of creating things any more. There is a pool of analysts and accountants that can push some funding around, tweak some simple policy, and publish some branded marketing. Throw in a bit of engaging with the sector, maybe that will suffice?
No, we need to do it ourselves not look to them to solve our problems ! For heaven sake, we are the prime movers in the economy and we should demand Govt butt out of our lives and let the economy find its own level. Them pulling leavers ( and each other) is what has caused all this when any businessman knew what lay ahead. Govt should do essential national infrastructure and defence and not all this other stuff that we don’t need them stuffing up !
Some might say enough affordable housing for essential workers IS essential infrastructure. Essential human needs in a modern society really shouldn't be at the whims of 'the market'. Water, food, energy, housing, health, education, transport(extensive public) etc should be public, all the rest of our luxury items can go do what ever they like in 'the market'.
Capitalism creates the unstable macroeconomic environment! It is fanciful to think that economies tend towards some kind of neoliberal, blissful equilibrium where everyone is competing perfectly, and the price and supply flow beautifully in line with models that blokes with physics envy dreamt up over bourbon in the 60s and 70s.
Joe
wouldnt that mean the government just takes over and funds an industry that can’t produce affordable houses?
how about we crash the land price, break the material cartels, get councils to focus on core services,banks to stop running a ponzi using imagined equity as security, open up land and services so a section doesn’t cost as much as a house in the US or elsewhere
at the end of the day the IMF will be looking over our shoulders…..
interesting times
Not sure that's the answer anymore. That won't give us density that we need and we lack the nous to develop infrastructure to serve single-dwelling sprawl effectively. There was some talk about factories here being able to make pre-fab five level townhouses, I would love to live in something like that. I wonder what happened.
E: From memory the first level had the flexibility to either be commercial space or high-stud garage and workshop space underneath. Three levels on top of my own double-wide workshop in urban sounds amazing.
I don't disagree, but don't see it as an either / or question. If we increased density in Auckland to that of say Berlin (where generous apartments in 5 story 1920s 'Wilhelmers' is the norm) we could house the entire population of NZ in Auckland. Why not also upgrade the free-standing ex-urban homes elsewhere to a more future-proof Scando standard. The mix of housing we've settled on at the moment (sprawling bogan castles contrasted with tiny flats in knock-up row housing) seems the worst of all possible outcomes, unless you're a land-banker or dodgy developer trying to maximise your markups.
well, duh!
Yes. The government should have planned and constructed massive prefab plants, by now.
In fact, Kiwibuild, which was originally David Shearer's idea before that fool Twyford and his useless colleagues got their mitts on it, was predicated on the government doing the building en masse. Rather than private developers being underwritten by the government.
But it seems in this neo-liberal world, regardless of whether 'Labour' or National are in power, that the government actually doing a lot of building is very quaint and old fashioned. Or, basically just a big no-go.
Don't forget they also promised to streamline consenting for high quality prefab / modular builds. A family member recently completed a very modest 100m2 passive house. It was designed and manufactured in Canada, shipped to the South Island and assembled on site. What do you think cost them more and caused them more nights of lost sleep - building and shipping the eco-house to NZ, processing the 'non-standard' consents with the big-brain local council, or getting it assembled by an incompetent local construction firm?
The irony is though that under the current system, every house in NZ is a one-off kitset house, it's just that they are assembled on site out of the smallest possible kit components - 2x4 and sheet rock. They still ended up with a stylish, economical and efficient SIPs home - far more so than would have been possible using local builders. It just cost twice as much to achieve it as it would have done literally anywhere else in the world, and not because of the shipping or material costs.
Govt have an absolute responsibility to intervene in failing markets - the question is how. The current model of tweaking levers and cajoling the market to do nice things does not work. The small building firms + sub-contractors boom and bust model with monopolistic suppliers is completely broken. A takeover would stabilise the boom and bust cycle (providing a guaranteed level of work for years). I would go further on land prices - 100% tax on profits from land sales.
Well Jfoe, clearly your recollection of the old Ministry of "Works" & mine are quite different. I remember that the MOW brought feather-bedding, & "make work" projects to an art form. Having some real engineering and contracting skills within government may be no bad thing, but expecting them to deliver the outcomes you suggest is pure fantasy. I imagine your Tooth Fairy will also cause local government, (in the coming downturn) to lay off surplus consenting staff, not to mention associated back room bureaucrats, and significantly reduce the cost of subdivision & building consents?
My prediction, if your MOW 2022, was to eventuate, is that $m would be spent of designing a logo & finding the appropriate 'Whaka.,,,' departmental title, followed immediately by some $b spent on Wellington and regional headquarters, then even more, enticing a suitably diverse range of senior appointments.
The whole edifice might groan into action by 2030 in a despairing struggle to meet the current Housing Minister's 'inspirational' target of 100,000 affordable homes by 2028. ....all to be achieved on borrowed money we lent ourselves and which will never need to be repaid.
Then again, the private sector's self-governance and responsibility dodging cost NZ over $50 billion and counting from the Leaky Buildings crisis. And there's still rubbish being built and responsibility being dodged. Whereas, how many former state houses are now investment properties...
Exactly right Jfoe. The problem with that idea however is that nobody gets rich doing it, and therefore it's off the table.
The best we can hope for in terms of a Government-led response is some kind of public-private partnership, where the tax payer covers all the cost and assumes all risk, while any profits end up in private pockets.
This is a discussion on E-deck, Titanic.
Productivity is essentially energy-efficiency. What isn't energy-efficiency, is ticket-clipping. I built 135 sq/m (in 2005, ex my labour) for 50k. It rates Homestar 8. I could still pull it off for sub-100k (if I was allowed - which I understand is not the case any more (ticket-clipping, monopolisation).
But the problem isn't building houses; the problem is human overshoot. We aren't underhoused, we are overpopulated. And that needs addressing, or all bets are off (you cannot grow forever within a Bounded System).
That has a knock-on problem, which Hickey seems unable to understand; overpopulation is the other side of resource-depletion; things will become more in contention, and that increase is exponential. We will NEVER see cheaper materials from here on in, unless it be via 'economic' recession/collapse. We have used the easiest/closest/best/most compact resources ALREADY; they're gone. Every 'next' option is harder, further away, worse, more dispersed (requiring more energy to access, energy which has the same problem itself). We are out of 1,000 year old kauri, out of 10:1 copper, out of 100:1 oil.
No amount of energy efficiency - what Hickey calls productivity - increase, can compensate for this. or for the parallel problem of the best sites being taken first. Meaning every 'next' option is 'worse'. Worse in energy/resource-requiring terms, when you boil it down. And we are stupidly assuming (via our energy-blindness) that compacting 3x3 urban housing is somehow maintainable ( post fossil energy, no city over 1 million is sustainable, that was the best we ever managed and with lower expectations and more resilience).
Summing up: we need to be aiming for less population. That says we don't need to build any more housing. But we are staring down the barrel of energy-reduction; orders of magnitude thereof, so triage will be one strand; lowest-hanging fruit (upgrading of existing stock) the other. The rest is based on false assumption(s).
Tells us that almost every Govt move - 3waters, 3x3 housing-cramming - is WRONG.
A hundred and fifty years ago there was a loony ranting and handing out flyers on the street corner about running out of whales for lamp oil and there not being enough horses.
It's tedious. You are as bad as Hugh Pavletich for mindless spam. There is _limitless_ energy available on earth. Technology will continue to be improved to access it more cost effectively. Necessity is the mother of invention.
Gotta say, though, 100% tech-optimist is as bad as 100% pessimist. But as in Neal Stephenson's surprisingly optimistic book Seveneves, humanity or a remnant of it will likely continue to thrive after tremendously difficult times to come. Assuming we don't manage to turn the planet into Venus.
Sadly not the case Brock. If we had significantly less population it would be buying us time across the board. Fossil fuels would last longer and give us time for significant technology improvements. The biggest problem is and will always be human nature we think we are smart but in reality we are stupid. Fortunately we will be stopped from spreading from this rock to further stuff up other worlds.
Whether or not the world is overpopulated is a philisophical debate on the subjective value of untouched wilderness versus human habitation.
But we are not going to run out of energy. If anything, the ease and cheapness of fossil fuels has held up the adoption of technological improvements.
You will be stopped from spreading from this rock only because you failed to produce children.
"There is limitless energy available on earth": the economist's dogma, and probably more dangerous than any actual religious dogma these days.
New York Times did a nice feature on ecological economist Herman Daly the other day. Well worth reading, along with Daly himself.
Building companies and realestate agents are the first to know a housing crash is with us, if anyone had doubts about the downturn this one is proof and rates have only just started to rise add on top high inflation the housing market which is so over valued will tumble more than ever before. Maybe government could take over building developments at cost to save them going bankrupt and turn them into low cost rentals as so many people living in cars and emergency housing.
I really question the tools we use to try and measure our economy. Most figures getting released are indicators of intention and plans from 6-12 months ago or more. Likewise any changes implemented by central powers might take that long, of longer, to take full effect.
There have been 30 or so years of builders and manufactures being able to put increasingly large amounts on the buyers mortgage. Where is the incentive for efficiency? Houses have got a little bigger and fancier but they could always pass on any inefficiencies (with markup), its not like the customer could not or would not borrow the money to pay you or your competitors.
Then Hickey wants to come along and use taxpayers money to bail out these builders who have failed to improve and support building costs at their current prices (neoliberalism 101). Construction is an industry where people can go bankrupt and start again (for better or worse) and some of these new companies and owners will find a model that works for lower costs. A crash in the market will also sort out materials costs.
There is no crystal ball required here and those who think themselves an oracle for predicting the future only look foolish to those old enough to have seen the cycle over and again.
There is nothing new under the sun and soon we will be discussing a trades shortage.
All will become stalled until house prices start to move north again from whatever base they find themselves.
I don’t think of myself as Nostradamus, it was easy to predict 18 months ago. But… almost no one was talking about it, when they should have been, right? I tried to get the conversation going, but there was very little engagement from other commenters or the website editors. When this website published the bullish building consent data, I tried to say it’s a false picture. But there were never any articles or analysis that talked to my points.
why?
I actually think, weirdly, many people didn’t/ don’t understand these things, as obvious as they might appear to me, or you.
you know, some things might have been thought of in advance to mitigate the looming collapse, right?
or maybe not? Maybe this is destined to always be a Boom / Bust industry???
Massive ground works, and houses going up all around Mangere already.
I've started tracking completed but unsold houses in my suburb of choice - that were previously 'By Tender' are now 'By Negotiation' and 'By Negotiations' are now 'Here is the number'.
I'm betting that number still has another 10% to fall; at which point the 5 bedrooms will take the four bedroom price, the four beds will cost the current three bed asking price and the two bedders might drop down to a sane number for an aspiring couple of FHBs. I'm just going to get my pre-approval ready and then start making lowball offers in a couple of months' time.
The why?
Is because we could solve the housing affordability crisis by claiming all the unoccupied properties globally. Every city in every global hotspot has exorbitant numbers of unoccupied homes. They are sat on by investors hoping to catch the capital growth in future rallies and they have nowhere else they are willing to risk investing it. So they buy up whats available with their profits/savings/equity and sit on them like gold and art.
Governments globally need to introduce a 'windfall properties tax' just like they are talking about 'windfall profits tax' then limit residential purchases to two per person and no purchases of residential to companies or trusts.
They can adjust laws to protect the value of a 'modest' family home from liquidation in legal cases, which would prevent innocents from homelessness in those instances and insure through regulation of Accountants/Bookkeepers etc and the tax system, that business owners are paying regular insurance to cover any financial impact to the family home of the other party.
We don't have, nor ever had, a housing crisis. We have a shortage of state housing due to the lack of building by the state over many, many years. There are heaps of houses out there, just not the right type of people to afford them.
You'd think that in seeing (indeed underwriting) the welfare baby boom over the past 50 years, that the same govt would have put a housing scheme in place to house all the new welfarees. Nope. Fail. pay them to breed & feed them, but forget to house them. this is a massive fail by central govt of all colours. So what does govt do to hide their incompetence? Blame the greedy boomer rentiers for buying up all the old stuff & renting it out to those who haven't even got a state house to apply for.
F@ck the govt. They're full of s...t.
I reckon there's a decent amount of building work that will appear if building prices come back a bit. Us, for one, and a few others we know too. Things that would be nice to have, but not essential with stupid prices. So I'm not too sure that we're going to see stacks of unemployed trades just yet.
I refuse to engage a builder who puts the hourly rate for 8 people down at $120 per hour, per person, and then supplies 6 apprentices at $25 per hour, 1 site manager at $60ph, and one carpenter at $55 per hour.
The flat rate for 8 people is $960 per hour (group 1), and the other (should hourly rates be charged at what is actually paid) is $265 per hour (group 2). Over an 8 hour day, at group 1 rates, that's $5,560 extra per day! Over a 12 week build, that's $333,600.
Even with KiwiSaver deducted at $29 per hour (for group 1), or $8 per hour (for group 2), that labour cost difference is exorbitant.
Then the builders adds on a further 15+ % to building materials as their margins.
And all of a sudden, what should cost around $250k to build, becomes over $580k.
Builders should only charge the actual value of the labour, and not a cent more. The margins should come from the building materials.
Why must there be margins on top of costs? If you as a builder are earning a wage which covers your time, travel, equipment and business expenses, paying the trades for their time, travel and equipment, and the costs of buying and transporting the materials, that should cover the build price. Why should there be a margin on top of that? Isn't that what we'd call greed?
"The busts in those cycles in housing are acknowledged as the main reason why so many builders and tradespeople prefer not to make permanent hires"
Having a son go through an apprenticeship, the whole trade needs a massive shake up. There are some good guys out there, but on the whole the industry hires staff as contractors (even though applying contract rules they clearly are permanent employees). This is really tough for youngsters, and leads to many never finishing their apprenticeships and becoming very disillusioned with the industry.
Personally I think this lack of professionalism is a major issue. A serious lack of any business nous leads to a large number of failures.
Here's what I've seen in the last 5-10 years as the typical site:
- most "experienced" guy is late 20s, with building ticket for 2-3 years
- rest of the building crew are apprentices 1-3 years in
The "experienced" one spends most of their day in circles trying to correct the apprentices, nothing gets done, bad habits get passed down.
Compounded by the fact we don't really train carpenters anymore, just guys to assemble flatpack framing.
There are some excellent builders out there, but even they don't want to work in the above environment. If you can find one, romance them.
My wife's been doing a carpentry apprenticeship, and it sounds like this exactly. She's been through a few different employers and there's a definite pattern...
-Older experienced guy runs the company. Takes on as much work as possible. Is a good builder but spends most of their time running around getting quotes, dealing with suppliers and clients, (test-driving new utes)...
-one or two younger guys with a bit of experience but mostly just on one kind of job, doing most of the important work
-an apprentice or two, working without a lot of guidance because the qualified builders are too busy. So they make mistakes and slow things down, or stick to the easy stuff (labouring) and never learn what they're supposed to.
-unrealistic timelines all around
There are unrealistic expectations of employees (contractors), ie low wages, long/unpredictable hours, no job security. The 'carrot' for becoming a builder is 100% 'you'll be self-employed once you qualify and then you can buy your own Ranger'; but this means the only people who do it are people with no interest in or understanding of management or working in larger teams. They are horrifically inefficient, not out of laziness but because there is no attempt or capacity to manage in the ways that are normal in other industries (which can't paper over incompetent planning by passing on charges).
A couple of points:
Is this good news for those who have older rental properties? is it a case of history repeating?
How on earth are the big highly leveraged developers that sprung up going to survive? The likes of wolfbrook and Williams Corp - they must have massive overheads and won’t be selling anywhere near the number of the last couple of years
Very good question.
One of the ways the likes of Williams Corp is trying to survive is by taking the race to the bottom. Many of their developments have very small living areas, and some of their developments now have little if any parking. So buyers will need to rely on on-street parking. Maybe there was a market for that during the boom times with FOMO at its peak, less so now, especially as interest rates rise aggressively.
There aren't a huge amount of those however if you go on the Auckland Council GEOMAPS you can see a few sections, that appear to be around 800sqm, divided into 11 properties with each unit selling for around 6-700k. No off street parking at all. It's amazing it was allowed.
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