On Site with Certified Builders – October 2012

The latest industry information brought to you by Jason McClintock, Operation Manager – Certified Builders Assn of NZ.

Unaffordable Housing

Are you spending more than 30% of your gross income servicing the cost of housing?

Since 2001 New Zealand house prices have increased at a greater rate than that of most countries within the OECD, over the last 20 years land has increased more quickly than house prices. In Auckland land price pressure has been particularly acute where section prices account for 60% of cost of a new dwelling, compared with 40% in the rest of NZ.

Since 1991 homeownership has been on the decline when around 75% of private dwellings were owned by their occupants. Since then ownership levels have declined to around 65%, this is slightly below the average of the OECD.

How can homes become more affordable?

The Kiwi lifestyle tends to force cities to spread out with less high density housing, this demands costly infrastructure. In Tauranga this is compounded by the harbour creating “fingers” of usable land, population demand pushes city limits out into greenfield areas of which are neither flat nor in a straight line from A to B. More streamlining and cohesion is needed between Local Government, the Resource Management Act and the Land Transport Management Act. These statutes have different legal purposes, time frames, processes and criteria with no single mechanism for facilitating efficient engagement and agreement between parties.

Cost of doing business

According to the NZ Productivity Commission there have been significant building cost increases since 2001, building materials (50%), cost of labour (88%) and land (115%). As a whole the building industry has not increased productivity since 1995, whereas most other industries have. Contributing factors include a skills shortage, now very noticeable within site management, supervision and administration, contributing to re-work. Many are owner operator building firms who have less capabilities to generate economies of scale, our buildings tend to be bespoke, one offs with less opportunities for higher volume standardise components and buildings.

Recent compliance such as double glazing, cavity construction and more stringent compliance through consenting and build processes eventually add cost. Regulatory change and heightened health and safety all load the cost of labour while achieving a similar end product to measure housing affordability.

Small building businesses cannot ride out the high peaks and deep troughs of New Zealand’s economic building climate, lack confidence to re fuel the industry through apprenticeship training and long term business consolidation.

There is no question that residential building is becoming riskier with sharper business skills required to mitigate risk and secure payment. Greater security of payment is now being demanded with tighter contacts being drawn up. The cost to administer and enter into litigation will only stall the productivity matrix.

Living the Kiwi dream of homeownership may have been on the decline since the early 1990, however the cost of doing business to create a more robust build environment has enabled family investments to become “safe as houses”.

Visit www.certified.co.nz to find your qualified builder.

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