Building industry insiders report downturn in Christchurch

Vacant sections await construction at a Christchurch subdivision. PHOTO: CHRIS BARCLAY
Vacant sections await construction at a Christchurch subdivision. PHOTO: CHRIS BARCLAY
Christchurch’s post-Covid residential construction surge has weakened with builders now jostling for jobs on shakier foundations.  

Interest rate hikes have priced would-be first home buyers out of the market, with building consents issued in the city dipping significantly over the past 12 months.

John Hamilton.
John Hamilton.
Master Builders Association Canterbury branch president John Hamilton said the industry was in the midst of a slump as members diversify to stay in business.

“The money has pretty much dried up from the banks because of high inflation. That has a flow down through to builders.

“The first things to go are the new houses. High interest rates means it’s unaffordable for first home buyers.

“What we’re seeing is the consent numbers are down on new housing.”

Mike Blackburn, an advisor to the construction industry who produces the Canterbury Construction Report, said the number of consents was in decline.

There were 3508 consents issued for residential dwellings in Christchurch during 2023, a 23.5 per cent decrease on 2022.

The reduction in the Selwyn district was more severe with 1154 dwellings consented in 2023, a 35.8 per cent drop on the previous year. 

Mike Blackburn.
Mike Blackburn.
Blackburn said the fall was not unexpected and the diminished activity was relative. 

“It’s not like the arse has fallen out of the market. What’s happened is 2021 and 2022 were absolute all-time record highs as far as construction goes,” he said.

“I’ve been banging the drum for 18 months now that building consent numbers were going to come back partly due to overbuilding and economic effects.

“In January 2022, the phones stopped ringing for most residential builders in New Zealand and the reason construction numbers continued to climb is because anything sold (in 2021), you won’t be pouring concrete for the foundations for at least another 12 months.

“Whilst 2022 was still a relatively good year, we didn’t really start to see a decline in building consent numbers until the beginning of last year.”

Hamilton, who specialises in renovations, noticed a decrease in new build activity before Christmas.

“There’s still work out there but everyone’s scrapping over it. It’s definitely a belt-tightening situation for everyone.

“We heard through the group housing side of things that people weren’t going into show homes, it was just unaffordable to build.

“We’ve really got to sort out how to do it cheaper while still maintaining quality.”

Hamilton urged the Government to implement a predetermined approach to safeguard the industry during lean times.

“We’ve talked about it in depth at (Master Builders) national level . . . trying to co-ordinate with government spending so when there’s a quiet spell it’s an easy transition to pick up infrastructural type work, schools or housing projects so you can plan as a company,” he said.

Asked if he was aware of any of the 360 members of his branch involuntarily downing tools, Hamilton said: “There’s definitely a little bit of pain going on out there.

“Everyone is looking in rather than out at the moment asking themselves: How can we just get through this?

Hamilton said builders were often turning to his forte, renovations.

“It’s not that easy to pivot when you’re set up for certain types of building but you’ve seen guys jumping into other areas and undercutting other guys,” he said.

He noticed homeowners were now more likely to work on their existing property than start afresh.

“If it gets busy it means people aren’t buying new. They’ll do the bathroom and kitchen because they can’t build now.

“It’s huge money to build just a basic home in Rolleston, you’re getting close to a million (dollars) now. That’s a lot for a first home buyer who’s never experienced a 9 per cent (interest rate) before.”

Like Blackburn, Hamilton is not surprised by the downturn, and acknowledges it is part and parcel of building in a fluctuating economy.

“We’ve had Covid, supply shortages, high interest rates. It’s a game that’s always got something trying to make you exit early,” he said.

“When interest rates started going up you didn’t need a crystal ball to know what was going to happen. Everyone is feeling it . . . retailers, the available spend has just gone out the window.”

Hamilton expected the tough times to continue, predicting interest rates would curb borrowing for the foreseeable future.

“I don’t think they’ll move up and down that much, maybe one or two per cent so this is going to be the new reality for people over the next couple of years. You’re not going to see 2-3 (per cent, interest rates) again for a long time.”