Managing the upturn

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By - , Build 133

Although house building has been going through some tough years, this is about to change, bringing its own challenges as businesses gear up to meet demand in our two biggest cities. How are companies preparing?

Stonefields site in Auckland.
Stonefields site in Auckland.

DEMAND DRIVEN by the Canterbury earthquakes and population growth in Auckland are expected to place unprecedented strain on residential building resources over the next two decades.

Christchurch requires 13,000 new homes as well as the repair of over 100,000 homes over the next 10 years. Auckland’s needs are even greater, with predictions that 10,000 new homes will be required every year for the next 30 years.

A massive challenge in itself, these requirements for the next two decades come on the back of historically low levels of house building. In 2011, 13,500 new home consents were issued across the entire country, the lowest activity since records began in 1965. Auckland annual house building over the last 20 years has averaged around 6,000 houses per year, about half what will be required. Historically, around 3,000 houses have been built in Christchurch each year.

The challenge of demand upsurge

What this means is that numbers of active construction personnel and volume of materials in the supply chain are at a low point, yet workload is expected to soon climb to record levels. While there is no resource shortage right now, there may soon be.

So how will the industry handle the upcoming demand in the next few years? Businesses from self-employed tradespeople up to nationwide construction companies are busy right now creating strategies and business plans for responding to greatly increased workload.

The upcoming workload presents great opportunities across all sectors of the industry, from increases in the number of apprentices and upskilling staff, to increases in materials manufacture, to more work through supply chains.

Further, with a significant number of new houses, there is the chance for a big leap in the overall quality and greenness of the country’s housing stock.

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Land to put the homes on

The ramped up workload is not without its challenges, chief among them availability of land on which to build. In Auckland, council’s planning around the Rural Urban Boundary and the requirement for significant infill development will have a major impact on what type of houses can be built.

In Christchurch, land matters revolve around damaged soils and where houses can, and cannot, be safely built.

In facing up to the challenges and opportunities, construction companies are gearing up for what is going to be a very busy couple of decades.

Fletcher Residential serves the Auckland region through the construction of residential developments of between 30 and 500 houses, such as the new Stonefields community in Mt Wellington.

General Manager David Halsey says Fletcher Residential is ready and able to build more houses in Auckland. ‘We are allied with Fletcher Building, have a number of good business partners and are confident that we can recruit new staff,’ he says.

‘Beyond stand-alone houses, we have had success building higher-density homes such as terraced houses, and we are currently investigating a new apartment block in Auckland.’

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Giving the customer what they want

As Fletcher Residential is a spec builder, it can adapt to the changing demands of homebuyers. ‘If people want greener houses, we can build them,’ says David Halsey. ‘We interview all potential buyers and then build the houses that they want.’

The company will not require any major shifts in how it operates and should be able to easily expand to handle increased volumes.

However, David does see one area of possible concern with all the new houses required. ‘In Auckland, the key issue is availability of land, whether for greenfields or infill type development. We can provide an increased number of houses if there is suitable land to build them on.’

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Subcontractors in demand

Mainzeal Living, a joint venture between Mainzeal and Stonewood Homes, has been formed to get involved in the residential rebuild in Christchurch. The company provides stand-alone houses on individual sites or in new subdivisions. They have a medium-term production goal of around 10 houses per month.

Most work is subcontracted to local companies, with 20 different contractors currently engaged. ‘Most subcontractors are looking for more staff in preparation for demand in the future, but at the moment, we are OK,’ says General Manager Noel Horan. ‘Our subcontractors are actually asking for more and more work from us – the expected volume of work is not there yet.’ To date, Noel hasn’t seen materials supply as an issue, although he says that, when the big commercial jobs begin around town, concrete supply may be one area of potential shortage.

As in Auckland, the key to being able to build is having the land to build on. ‘There is land available, and developers are flat out getting land titled, subdivisions approved and infrastructure in, but most areas are not quite ready yet.’

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Raising the standard of housing

Noel Horan says that Mainzeal Living wants to improve the standard of housing. ‘We are aiming to get our houses to a Homestar 5-star level and are setting our specs to meet that. This ensures houses will be warm, dry and energy efficient, which we believe the market wants.’

Building higher-density housing is a possibility for Mainzeal Living. ‘We may look at terraced houses further down the track, but not apartments,’ says Noel Horan. ‘There seems to be enough land around so that subdivisions can be designed for separate dwellings so that people have a bit of space around them.’

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Steady as she goes but ready

Fowler Homes has provided house design and build services in Christchurch for 30 years and has 18 offices nationwide. It also expects to be building more houses as a result of the earthquakes. However, rather than establish a new business line, the company plans to continue its established practice of working with individual homeowners and using referrals to generate more work.

‘We are not doing anything in particular to try and get involved in the rebuild,’ says Managing Director Tony Hill. ‘Some companies are out there gearing-up and looking for more work, but we will wait for demand to grow naturally.

‘We have a 90% referral rate for new business, and we expect word of mouth from existing satisfied clients to continue to drive demand.’

Fowler has recently opened a new office in Woodend to cater for the expected population growth north of Christchurch and near Rangiora. The office was planned before the earthquakes, and the expansion is timely considering where new demand is going to be.

Tony Hill does not expect that upcoming demand for new homes will be an issue in terms of resources in the near future. ‘We have loyalty with our subcontractor trades and have used some of them for decades,’ he says. ‘We believe we will always be able to obtain resources, but this may be an issue for new starters in the industry.’

Fowler Homes has been in Auckland for 6 years and believes the new home market is steady and growth may be starting. ‘Given the land availability issues and the desire to be close to the city, it may be that people will look for more affordable city fringe properties with basic 1950s and 60s houses,’ says Tony Hill. ‘They could then replace the existing house with something modern, comfortable and efficient.’

This regeneration of existing properties would suit the Fowler approach of working with clients on individual dwellings, requiring no changes in the way the company operates.

Tony Hill can see opportunities on the horizon but is not rushing to secure resources or materials supply just yet – like others, he suggests that there might be a reasonable gestation period before large-scale house building begins in Auckland.

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Stonefields site in Auckland.
Stonefields site in Auckland.