Australia | Feb 18 2014
-High density upside in Auckland
–Office, schools being strengthened
By Eva Brocklehurst
New Zealand may be heading for a building boom. A number of factors are conspiring to raise the outlook for construction on the Shaky Isles. The rebuilding of the Canterbury region following the earthquake in 2011 is continuing and could combine with a rebound in the Auckland housing sector to produce a new construction peak by March 2016, according to findings from BIS Shrapnel. The report from the industry researcher analyses the building and construction sector in New Zealand from 2014 to 2019.
The value of building, both residential and non-residential, over the next five years is forecast to reach more than NZD10 billion and this, if realised, will exceed the historically high levels recorded over the boom period of 2004-2008. The re-building of the country's second largest city, Christchurch, will provide the biggest boost but other factors supporting this prognosis include relatively low levels of new residential building over recent years, which have left a housing shortage. Added to this is population growth and relatively low, albeit rising, interest rates.
BIS Shrapnel believes this growth will be underpinned by favourable economic conditions which should include warehouse, factory and office building on the North Island in the mix. Commercial and industrial authorisations are forecast to reach NZD2.39 billion in average annual terms, again substantially above the former peak years of 2004-2008.
Report author Adeline Wong expects Auckland will experience strong growth in residential construction over the next five years. The number of dwelling consents in the country's biggest city is expected to rise to around 10,000 by 2017/18, from 4,760 in 2012/13. Ms Wong believes high house prices in Auckland may drive first home owners to settle for cheaper apartments and the high density sector may therefore present upside over the forecast period.
There is another aspect. Earthquake strengthening work that's planned for offices and remediation on schools in Wellington could further underpin this boom. The downside risk for the analyst's forecasts lies in this area, plus whether the timing and scale of the Christchurch reconstruction is less than expected. "Some owners of quake-damaged and earthquake-risk properties may not commit to redevelopment in the short term, which would impact the overall outlook," Ms Wong cautioned.
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