Construction giant Fletcher Building is continuing to pursue a 'fledgling strategy' that could see it factory-producing affordable homes

Construction and building materials giant Fletcher Building is continuing to flirt with the idea of mass-producing low cost homes for the New Zealand market.

The company under the auspices of chief executive Mark Adamson, who took on the CEO job last year, has set up an internal programme to look into the potential manufacture - perhaps of thousands - of low cost homes.

The programme is looking at Europe and the rest of the world as to how they manufacture lower cost housing in factories.

“We’ve got a team going to Europe in the next couple of months," he told a media briefing at which the company announced net earnings of $326 million for the June year up from $185 million a year ago.

“That really is a fledgling strategy. I won’t be in a position to talk numbers or intentions for probably 12 months around that. It is very much new to us," he said.

Adamson said that since taking the reins at Fletcher Building he had bought a house in New Zealand "and one thing that dawned on me is just how unique it is".

"Every house seems to be entirely different to the last one and that drives huge cost in terms of building the house."

He conceded that a "cultural change" might be needed in terms of Fletcher producing low cost houses that "are more uniform if you like" but said there were ways around that.

“The main cost that’s driven in the house is the floor plan, where the walls are, where you put the plumbing, all that can be the same and yet on the outside it looks very different."

He  stressed "that there will not be a factory in Auckland in the next three weeks building prefabricated houses because we have to look at it from a marketing point of view".

But he said the company would be looking whether there was a market for such homes, at what price, would people go for it culturally and how could the company meet the need in the market.

"The technology really is the easy bit. With our scale, our balance sheet and our existing positions in wood, timber and concrete, plasterboard etc, that’s kind of easy. "

But the question about whether it would fit culturally in New Zealand was "very pertinent".

"Is there an appetite in the market for that sort of house?  That’s the big question for us. It is by no means determined that we will go into low cost housing of that nature. It needs to be tested."

Less of a testing ground in the past year has been Fletcher's existing residential activities, which helped lift the company's NZ operating earnings before significant items by 38%. This increase was driven mainly by rising levels of new house building activity and strong momentum with the repairs and rebuilding work in Canterbury.

The company has been buying buying up land in Auckland as it seeks to find ways of supplementing and ultimately replacing earnings from its development of bespoke homes on the old Stonefields quarry in suburban Auckland.

“We’ve enjoyed strong earnings from that this year and that will continue for at least another 18 months we think."

However, the company had been "conscious for a while now" of needing to replace that.

“We have the Three Kings Quarry and we are looking to accelerate developments around that.  It was originally anticipated that would be a five-year process to refill that to the point where we could build.

“[But] We think that with some clever engineering and design we can bring that forward to two years."

The company had recently purchased the Manukau Golf Course and "that will be an exciting development". There were some smaller parcels on the outskirts of Auckland that the company had also purchased.

“Really in terms of our housing strategy, we would look to build more of that type of house [in Stonefields], but it is not just going to be driven by that."

As well as the possible moves to lower cost housing the company was also keen to "participate in the regeneration" of public housing stock.

"...We do have dialogue with the various agencies around what we can do to help those guys.  

“We have skills and expertise now that we have developed in Canterbury around the [earthquake recovery] work. At any one point in the cycle in Christchurch in the last 13 months we’ve been managing up to 19,000 contractors repairing homes.

“It’s not a great leap to expect that sort of management team and process to be able to construct homes as well. So, we are in dialogue from a public sector point of view.

“So, it is not just finding more Stonefields, it really is broadening our net in terms of how we can provide houses of all kinds from the million dollar homes to the cheaper homes right across New Zealand."

Adamson believed that initiatives such as the Auckland Housing Accord, which targets the building of 39,000 new homes in Auckland over a three-year period, would be helpful to getting more development done.

"I think there is definite political will on all sides. You look at the Unitary Plan in Auckland and some of the recently announced measures. None of them in themselves are going to be a magic bullet but I think it is really pleasing to see that both the industry and the Government – of all colours – really have this as a top priority."