The construction industry in New Zealand has always suffered from a lack of resources, particularly during the peak of the “build cycles”, when there is particular demand for suitably experienced and skilled construction workers (including tradesmen and professional consultants).

Increased Demand

We are currently entering a period when there is increased demand on the resources required to undertake large infrastructure projects and residential building developments. In particular, the residential building sector is set to take-off in response to the need to increase residential supply, and partly in response to the Government’s objective, which, as far as I can tell, is to remove the private sector from the business of providing residential rental accommodation. Much like the way the Government has approached the smoking problem, it appears that they are attempting to legislate and tax the private investor out of the game. However, at present, the Government hasn’t gone full “Mugabe” on private investors, and are willing to compromise and treat private investors, who intend to build new housing stock (for rental purposes), as they treat other citizens (for financing and tax purposes). This will likely incentivise more investors, who otherwise wouldn’t contemplate it, to build new houses for rental purposes.

Competing with the resourcing required for increased house building will be the demands placed on the sector by the large infrastructure projects, which have been shovel-ready now for eight months, and which must be starting shortly?

‘Brain Drain'

The net result of this peak demand for construction sector resourcing will be that the delivery of the projects could be adversely affected by the inability of the sector to provide the necessary resources. This will be exacerbated by the “brain-drain” to Australia, who have had their borders open to New Zealanders (one-way ticket) for six months now. Australia is embarking on a huge infrastructure spend, paid partly by increased revenue from selling their natural resources: iron ore, coal, and natural gas. Australia, which is more likely to actually have “shovels-ready”, has the potential to entice a percentage of our tradies, engineers and surveyors, with promises of higher wages and cheap accommodation (another consequence of the impending rental crisis in New Zealand).

So, at a time when we least need it, there is chance that the “brain-drain” may come back with a vengeance (which was the number one election issue in 2008 when John Key came to power).

Migrant Barriers

We have previously relied on importing skilled labour and engineers to the country, to help alleviate such resourcing issues, however, this will also be more difficult in the future, as the Government moves to an employer accreditation scheme, which will result in more barriers (and costs) being put in place for employers to be able to employ overseas staff. Once again, these measures couldn’t come at a worse time.

It will be interesting to see how the construction industry performs over the next couple of years and how it copes with the issues/barriers, which have the potential to affect the ability of the industry to meet the challenge.

Given the supply pressures on labour and materials, it is likely that the construction costs will increase even further, which is going to make it difficult for the Government to rein in house price inflation.

Fraser Thomas is a multi-disciplined wholly NZ-owned engineering and land surveying firm. We have offices in Auckland (Highbrook and Mt Eden), Christchurch, Napier and Blenheim. We offer a “one-stop shop” for engineering and land surveying services required for building and land developments. Please call Mason on 021 979296 to discuss your project.