A Resilient Sector Well Positioned To Navigate Headwinds

Rotorua, Friday 26 August 2022: The Registered Master Builders Association’s annual State of the Sector survey has revealed that while the building and construction sector continues to face significant challenges, there are encouraging signs of underlying resilience in the sector.

Released at this year’s Constructive Forum, the survey identifies the biggest challenges and opportunities facing the sector. For the first time, the survey explored both the supply and demand sides of construction. Over 1,200 sector participants and homeowners who had built or completed a significant renovation in the past three years responded to questions about their experience building, the economy, critical issues they were facing, and their outlook for the sector.

A key result from the survey revealed that while 79% of sector participants think the economy will deteriorate over the next 12 months, only 31% of builders think their own businesses will be worse off.

Master Builders Chief Executive David Kelly draws on the optimism of this result saying, “This is a sign of underlying resilience in the sector, with many having strong order books and consent numbers remaining high. There is still demand across the sector, especially so in the commercial construction sector, where the pipeline remains incredibly strong.”

This sentiment was shared by homeowners, with the survey revealing that nearly half (45%) of all homeowners stating they would recommend building to others in the current environment.

The survey also revealed that the sector is still confronted with ongoing challenges. Cost escalation (96%), supply chain disruption in concert with product availability and increasing product substitution (95%), and skill shortages (67%) were identified as the three most critical challenges facing the sector, all an increased proportion on the year prior.

Kelly continues, “While these issues were also felt keenly last year, they are significantly more accentuated in this year’s survey. Additional costs and project delays are the consequence of the pressures facing the sector, and in turn these are causing a rise in the number of customer complaints and disputes.

“Finding skilled staff also has appeared in the top five issues every year since we began Constructive seven years ago. What is reassuring is that apprentice numbers are increasing, and more of those surveyed are taking on new apprentices than ever before.”

Almost 60% of respondents say it’s harder to get the staff they need than it was 12 months ago. This builds on last year’s results where 66% of respondents were already finding it harder to get the staff they needed than in 2020. Of those looking to bring skilled labour into the country, only 7% say the current settings are allowing them to bring in the labour they need. 31% are bringing people in, but with difficulty, and 62% are not able to bring in the skilled people they need. The current immigration settings are seen as being too complex, cumbersome, and time-consuming to navigate.

Consenting continues to also be a significant issue for the sector, with 80% of respondents reportedly impacted by consenting delays, which is consistent with last year.

“Consenting is an area where some quick wins could save the sector considerable time and costs – both sector participants and homeowners are reporting the cost increases and disruption caused by unresponsive consenting processes. While we are pleased to see this is on the Government’s reform agenda, we need to ensure we develop some fast improvements to help the system now, while the full review takes place,” says Kelly.

The survey highlights the impact these issues continue to have on the sectors’ mental wellbeing. 87% percent of respondents noticed a rise in stress or mental health issues in their business over the last 12 months.

Kelly expressed his concern, “This was on top of an already stressed sector, as seen in last year’s result, in which 88% of people said that stress and mental wellbeing was an issue in their business. We must improve the mental wellbeing of the sector to keep delivering the homes and infrastructure that New Zealand needs.”

Despite these challenges, there is an opportunity to shape the direction of the current cycle.

“The market may be turning, but we shouldn’t talk ourselves into a deeper downturn. Let’s not underestimate the sectors resilience.

"This is very different to the previous downturn after the GFC, when all work just stopped. This time we still have strong order books, especially across renovation and commercial construction. And the Government is committed to a large civic building programme.

“Finally, it is important to remember, if you are in a position to do so – now is still a good time to build. It is also unlikely to get cheaper to build in the future,” states Kelly.

The annual Constructive Forum is an industry led effort to enhance collaboration, build resilience, and ensure a vibrant and sustainable sector that delivers for New Zealand. Its purpose is to bring the entire supply chain together, from Government, finance, land, design and build, and key enabling sectors such as research, training and regulation to work together to develop strategies that will help the sector collectively emerge more resilient.

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