Overhauling the New Zealand construction sector for the sake of KiwiBuild

With statements like “Property prices reach new high” or “Auckland in top four of world’s least affordable housing markets” or “Kiwi house prices continue to soar” constantly in the headlines, it’s no surprise then that the lack of affordable housing, and the underlying causes of this problem, are such a hot topic of conversation in New Zealand.

Hot property, hot topic
When comparing the cost of housing with levels of income, it’s a fact that Kiwi homes are among the most expensive in the world – with Auckland house prices a whopping 10 times the median household income, and homes in Queenstown, Tauranga and many other cities also classed as ‘seriously unaffordable’.

No wonder then that the Government’s election promises around its KiwiBuild proposal drew so much attention and support.

The KiwiBuild dream
With KiwiBuild, the Government has committed $2 billion of the taxpayers’ money with the aim of delivering 100,000 affordable, quality homes for first home buyers over 10 years. It hopes that such a massive uplift in supply would also help to reduce house prices from the current highs to a more-manageable ‘five times’ household income.

That said though, it’s worth noting that, historically, prices above three times the median household income used to be viewed as unaffordable. But, times have changed and anything will be better than the eye-watering prices Kiwis currently have to deal with.

However, the secret to success will lie in ensuring that those 100,000 KiwiBuild homes are delivered in addition to the number of homes that would ordinarily have been built over that same 10-year period – otherwise we’ll really be no better off.

So, the question is, can New Zealand build that number of additional homes?

Overhauling the way we build homes in New Zealand
While tackling housing affordability by dramatically increasing the supply of houses is an obvious solution, actually doing so is going to be a lot easier said than done. That’s because one of the many challenges facing the goal of KiwiBuild is that there simply isn’t the scale and capacity in the New Zealand construction sector required to build the number of houses that the country needs.

So, for it to be successful, KiwiBuild cannot simply be about tackling affordability by increasing supply – it’s has to also enable a transformation of the residential construction sector. A sector characterised by the high cost of building material, land and labour; a complex regulatory environment; convoluted and costly planning approvals processes; and the presence of many small building firms who simply don’t have the capacity to deliver large numbers of new homes at pace.

All these things bog down the New Zealand construction sector and will need to be addressed and solved if the dream of building an additional 100,000 quality, affordable homes in the next 10 years is to be realised.

In other words, solving the supply issue is just half the solution. Solving the structural problems in our house-building sector to enable large-scale housing development projects to be economically viable is the other half of the solution.

Going off-site to stay on track with their home-building goal
Clearly, the Government is not going to be able to do all this on its own. No surprise, therefore, to see that recently the Government has been inviting expressions of interest from local and foreign companies who would be keen to set up or expand off-site home-building factories to make KiwiBuild homes.

Such off-site, high-tech manufacturing of factory-built homes, like they do in Europe and North America, would help to address some of the constraints faced by the New Zealand construction sector and could enable the building of quality, affordable homes quickly and at the required scale to deliver the KiwiBuild promise. It could really be the game-changer that New Zealand needs. Only time will tell if, as a country, we get this right.

However, with around $2 billion dollars earmarked for building those 100,000 additional homes over 10 years, there’s going to be the proverbial shed load of work in the construction pipeline for everyone and anyone in the New Zealand construction industry for a long time to come.

Have a share in the construction pipeline by remaining a viable player in the sector
So, if you operate a business in the New Zealand construction industry then it’s going to be important for the future earning potential of your undertaking to ensure you remain a viable player in the sector.

One way of doing so is by looking after the long-term health of your business by correctly managing the risks associated with your operation. With our range of Surety Bonding and Building Warranty products, Bonded NZ are specialists in helping firms in the construction industry manage their risk so they can stay on top of whatever construction project they’re working on.

Don’t delay; get in touch today with the team at Bonded NZ for a professional and informed discussion about the options available to you for protecting your construction business and remaining a viable player in the future of the New Zealand construction sector.