There are signs the big cost increases and supply chain issues plaguing the construction industry for more than a year may be starting to abate.
A survey of building material suppliers by EBOSS, a company that operates a building materials specifications database, has found that the number of suppliers experiencing difficulties supplying the market has halved from 64% in July last year to 31% in February this year.
This has mainly occurred due to an improvement in international freight movements, with 53% of the survey respondents reporting that moving international freight has eased a little, and 22% saying it has eased a lot, with just 11% reporting it has become more difficult.
However the situation was not so bright on the domestic freight front, with 43% reporting domestic freight movements have eased and 31% saying it has become more difficult.
EBOSS managing Director Matthew Duder said the latest figures suggested the international supply chain for building materials was settling down.
"In particular, structural materials suppliers have seen major improvements," he said.
"Thirty four percent said they have issues supplying the market in February 2023, compared with 78% just six months prior.
"This is a significant indicator that the supply chain is over the pinch points we saw in 2022 and is more resilient," he said.
The survey also showed that many building products suppliers had increased their stock levels to prevent shortages of materials.
"The Q1 update reports that 71% of building product suppliers had increased their stock holdings in the six months to July 2022, and 59% say they have further increased their stock holdings over the past six months," Duder said.
"This, together with decreased international pressures, has resulted in decreased lead times, which are now almost on par with pre-Covid levels.
"Long lead times and uncertainty of supply has caused a lot of frustration over the last few years, so this is welcome news for architects, builders and building owners," he said.
At the same time, there has been a significant slowdown in the rate at which building product prices are increasing and some suppliers are even starting to reduce prices.
The latest survey update found that building material prices increased by an average of 19% over the 12 months to February, but this had declined to 6% in the six months to the end of February, and indications were that it would decline to 3% over the following six months.
There were also indications that some prices could already be in decline, with 8% of suppliers reporting that they had decreased prices in the last six months, and 11% indicating they expected to decrease prices in the next six months.
The comment stream on this article is closed.
- You can have articles like this delivered directly to your inbox via our free Property Newsletter. We send it out 3-5 times a week with all of our property-related news, including auction results, interest rate movements and market commentary and analysis. To start receiving them, register here (it's free) and when approved you can select any of our free email newsletters.
22 Comments
This is how an industry-wide collapse plays out.
Yip. Supply out Plays demand and price fall as happened post GfC.
Not sure Increasing stock is a great idea at this point in the cycle.
Price reductions in building materials, who would have thought? Not many on here. And as the increased interest rates bite, we will see this play out in areas other than building materials, even with oil prices increasing, as they have recently.
Shipping rates are -36% of 10 year average. As I keep saying inflation has peaked. That’s why Orr hiking rates is so frustrating. He is choking an economy that is recovering post covid. This could be the booming 1950s but he seems to want the depression of the 1930s.
But is that being passed on or somehow magically absorbed along the chain with discernable gain of anything but price.
i.e. decision made to absorb the gain due to lower sales for the same net result to business .
Anyone who stocked up while shipping rates were high will want to maintain prices until they can clear current inventory. Once they re-buy there will be a softening of prices. There is a lag effect but as far as I can see global prices peaked in July/August.
Everyone is talking about a major bust.. do you keep your margin as high as your competitiors let you and refill the larder for the tough times ahead, or do cut your prices to the bone?
Shipping rates have nothing to do with inflation in services, which is 2/3 of the economy. And its in services where inflation is raging. Deflation in goods may offset some of it, but until services inflation looks under control then interest rates will need to keep increasing.
Services inflation is topping out at around 6% with the heat over the summer driven mostly by Air NZ and tourism / accommodation / hospo companies restoring profitability. We might see a slow decline in service inflation as insurance prices and local govt rates keep the pressure on (quick hike the OCR!)
Goods inflation is still running higher at 8% (down from a high of 9%) with imported food prices up a ridiculous 25% year on year.
Stats NZ publish services vs goods inflation in Table CPI016AA.
As they say, "the cure for high prices, is high prices".
Give it 6 months these suppliers will be begging people to buy materials.
Yeah imagine if they had to compete for demand instead of having as much as they could handle
With demand falling, supply issues will not be a problem from here on in.
2 cents from the ground floor (purchaser rather than supplier):
- imported supplies have become more available, and price increases seem to be slowing
- locally produced supplies often still have really long lead times (many months for aluminium joinery), and don't seem to be getting cheaper. This is likely a product of labour shortages and how erratic internal freight is. The quality of some of these supplies has also diminished rather significantly over the past 12-24 months, at a guess from a combination of hurried manufacturing, and an increase in inexperienced newer workers.
I get the feeling the labour shortage is rapidly diminishing. I’m not seeing as many “help wanted” signs, and places I shop at seem to be adequately staffed all of a sudden.
It’s hard to know exactly what’s going on especially when our stats are so out of date, but I do think the economy and local inflation are on the way down.
The problem is, that even if local inflation is zero, it would need to sit there for years before things become affordable again.
Inflation is not the issue,the actual cost of living is the issue. We need deflation.
The people that retain their jobs and businesses need deflation. The price is the rather dramatic rise in living costs by those who lose their livelihoods.
Work colleague just moved to Perth, hubby is residential building foreman. He's gone from $35/hr in NZ to $67/hr (plus 11% super) in Perth with vehicle supplied. He is building 4 bed, 2 bath aircon homes with pool that sell circa mid $600's. They are renting one these for $550 a week.
There are many, many endemic things wrong with the NZ residential building market, all stacked against the buyer. No sympathy for what's coming, unfortunately it will take the economy with it.
It's Perth though. They have to pay that sort of money to attract people, everything's subsidized by pulling resources out of the ground, plus building is cheaper, flat land, no earthquakes, lesser building code.
If they were a decent tradie they could've changed employer and been earning closer to $50 the past few years.
Perth is nice.
50 bucks compared to more money in Perth, better package, more sun, cheaper housing, more disposable income. Not sure why they would still choose NZ. I choose NZ for family and friends, but definitely not affordable living. It's tough here, looking forward to a correction. 50 bps on top of other rises and DTI, plus other things stacking up for a correction and long plateau. Interesting times ahead.
NZ has been a bit stuffed by older speculators' entrenched entitlement mentality, also infesting our parliament for the last 20+ years.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.