Whilst the UK bakes in Mediterranean conditions New Zealand is in its mid-winter season with temperatures averaging 10c, this report indicates that the outlook for construction is also wintery in nature.

New home build inquiries have declined steeply since last year, and residential construction intentions have plummeted – but the industry expects it will avoid a global financial crisis-style crash this time around.

ANZ’s latest business outlook shows residential construction intentions have plummeted to a fresh low, down to a net -73.7% in July from -57.9% in June.

A reading of zero would mean the sector was evenly split on whether the outlook was positive or negative.

The bank’s chief economist, Sharon Zollner, said it was a “truly spectacular crash” in sentiment, and the outlook for house building had hit a brick wall.

New home consents are now dropping, and ANZ’s business outlook data suggests they may have a lot further to fall yet.

Consents are currently at historic highs, with 50,736 issued in the year ended June. But, on a monthly basis, the number of dwelling consents fell 2.3% in June, and it was the third monthly decline in a row.

With ongoing rises in costs, delays due to supply chain issues, and a string of building company liquidations, no-one expects the construction boom to continue, but there is much speculation around how bad the fall-out could be.

Recently, there have been reports of a significant drop-off in new build inquiries. Some estimates suggest an 80% to 90% decrease, but Master Builders chief executive David Kelly says hard data on this is difficult to come by, and no-one really knows how much inquiries have fallen by.

Group home builders, such as Signature Homes, Stonewood Homes and Jennian Homes, say demand is lower than it was previously, and inquiries and sales have slowed.

Building Industry Federation chief executive Julien Leys says the decline in new build inquiries is marked. Some group home builders, which do 50 to 100 home developments, have seen orders drop off the cliff, he says.

“One builder had 48 homes that people had signed up for, and those buyers have all now walked away from them. That is a huge change in order numbers, and it hits hard. The level of demand has fallen, and an industry slowdown is on the way.”

The record level of consents issued over the last year is unlikely to be matched by an equivalent number of new homes, as New Zealand has never built more than 40,000 in one year, he says.

“But the high consent levels do mean many builders have order books which are pretty full for the next 12 to 18 months. The question is what will happen when that pipeline of work has been worked through? What will be happening early next year?”

One handbrake for the industry is escalating costs. Leys doubts this will change any time soon, primarily because of freight costs. Trans-Tasman shipping costs were up by 40% in July, compared to the same time last year.

Another handbrake is the lack of skilled labour, with a new EBOSS survey showing 91% of builders think there are not enough staff to hire. This contributes to project delays, and cost increases.

These factors mean a downturn is on the way, and there will be more company insolvencies, Leys says. “But the sort of crash that occurred in the GFC is unlikely as the fundamentals behind that scenario are not there now.”

Home-buyers are wary about new builds due to the cost issues, but another reason for the slowdown is the tough lending environment created by the CCCFA rules and banks’ tighter criteria, Kelly says.

“It looks as though banks are starting to rethink that for some, and that will help. There are other counter-balancing factors at play too. One is the existing pipeline of work, which will take time to work though.”

Another is the Government’s commitment to supporting home building through the Affordable Housing Fund and Kāinga Ora, he says.

“The timing of the fund is important as it will help to derisk the situation for some development. There is also a big pipeline of work with Kāinga Ora. This won’t solve all the problems, but it will help, and it is something that was not there last time.”

There will be pain ahead for some as that is always the case in this type of environment, Kelly says.

“But the industry has been on a continuous upward trend for about 10 years, a particularly long growth cycle. It always had to come to an end, and now we are going to see a correction, rather than a crash.”

Demand for builders and new builds has far exceeded supply in recent years, and the coming downturn is likely to change that, Certified Builders chief executive Malcolm Fleming says.

There will be some shaking out within the industry, but it will be more of a realignment after an extraordinary boom time than a crash, he says.

“New Zealand still has a housing deficit, and the Government has been working to get away from the boom-bust cycle we’ve had in the past. So there is Kāinga Ora work that needs to be done, as well as some iwi social housing projects.”

There is also the retirement home building space, which continues to grow, and demand for work in the renovation and refurbishment remains strong, he says.

“For consumers who want to build, there will now be more opportunities for them to get the builder they want and to work with their builder closely.

“But cost concerns mean there is likely to be a realignment of expectations around the size of the house they need as the bigger it is, the higher the cost.”

There is still buyer demand out there, but many buyers are sitting on the sidelines because they can not get finance, or because they want to see what happens with the market, Waikato developer John Kenel says.

“The market has slowed, more than it should have because of the tighter LVRs and the CCCFA rules. Now, the only people buying and selling are those who have to, so there has been a big decline in new build inquiries.”

But while there are fewer inquiries, which affects orders, the inquiries he is getting are more serious, he says. “There was a lot of speculation, people buying off-the-plan and hoping to flip, and that has gone.”

Kenel, who is chief executive of Assured Property, thinks the market will stagger along until something changes to offer more certainty to buyers. That might be a reduction in the LVRs, or a stabilisation of interest rates.

“Builders and developers are affected by the downturn in the cycle, but that is what it is – part of the cycle. I’m not panicking, and I don’t think the bottom will drop out of the market. People need homes, and property remains a stable and secure asset.”

Economist Tony Alexander says consent numbers will fall away rapidly, and a fair amount of those already issued will not be built.

“Lots of people are over-exposed as the high level of demand for new builds has dropped off, and many of the inexperienced and over-optimistic would-be developers who entered the market will see failure.”

But there will not be a repeat of the industry crashes of the 1970s, when consents dropped from 40,000 in 1975 to 15,000 in the early 1980s, or the GFC, when consents dropped from 26,000 in 2007 to 13,500 in 2011, he says.

“Back in the GFC, mortgage rates were at 10.5%, while unemployment jumped from 3.6% in late 2007 to 6.1% by late 2010, and stayed close to 6% through to 2013.

“This time round, unemployment is not likely to go much further than 4%, some fixed mortgage rates are already coming back a bit, and credit is starting to flow a bit more freely than it was earlier this year.”

He believes buyers are still round, but waiting in the shadows to see what happens with interest rates and house prices.

“When there is more certainty, they will re-enter the market, but over the next year or so we’ll see a collective focus on falling consent numbers. This will be a mild reality check for the home building sector, but it won’t be a horror show.”

Source: Stuff

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Not really a construction story this one, but I thought it was charmingly put together and having just witnessed an unsuspecting tourist lose his Fish and Chip Lunch to one of the marauders, I thought it was something that folk in general should pay heed to, happy weekend everyone, Lyn

Winged hooligans bring misery to the heroes who empty our bins

A new front has opened in the war between mankind and vicious flying fury – the seagulls are after our refuse collectors, and they’re bigger and angrier than before.

Refuse collectors all over the country say that the avian criminals are bolder than ever in their attempts to get their beaks into tasty rubbish, to the point that they’ll physically attack any poor human that stands in their way.

And one national waste and recycling company,  Divert.co.uk – says the problem is only getting worse, and has the pictures to prove it.

“It’s like a scene out of an Alfred Hitchcock movie,” says Divert.co.uk spokesperson Mark Hall, “The one with all the birds”.

While seagulls and rubbish dumps go together in a love-hate relationship like Han and Leia in Star Wars, Hall explains, “these new super-angry seagulls are becoming a total birdemic, with our teams being forced to run for their lives”.

Birdemic: What’s going on?

When Eric Cantona famously made his bizarre ‘seagulls follow the trawler’ speech, he was wrong in every way. Seagulls, as we all know, follow the bin lorry, and the feathered fiends seem to be getting more vicious every day.

Barely a day goes by without the beady eyes of the airborne hooligans settling upon one of our team emptying a bin or unloading the truck, without them swooping in for the kill, squawking like a demented car alarm.

Whether they’re protecting their young, looking for tasty treats among the refuse, or that they simply hate humans, it looks like increasing numbers of urban gulls are fighting for every scrap of food they can find, and they won’t let waste collectors stand in their way.

And one thing is certain among veterans of the waste industry- these monsters are more numerous and far larger than the scrawny specimens of the past.

“It’s like they came from an Evil Scientist’s lab”, says Divert’s Mark Hall, “but we know that the birds are eating better, getting more confident, and know they’re getting the better of us.”

“God help us all if these monsters start organising themselves.”

“It was like a nightmare become real,” says refuse operator Dariusz of one of his several bird-based ordeals, “they came out of nowhere and just went for me, all beaks and claws.

“I had to run for the truck cab to save myself,” he said, “there were already two other guys in there doing the same.”

It’s even worse by the coast where, emboldened by the easy pickings left by careless tourists, the winged ASBO candidates have declared war on people tasked with taking their food supply away – the vulnerable, and some would say innocent, refuse operative.

“Empty a seafront bin?” says refuse collector Mark Taylor of Addingham, “not without full protective gear. I’m ex-Forces and nothing terrifies me more than those flying gits.”

What can be done?

The rise of the urban gull and their evil human-hating ways comes directly from human activity.

High-rise buildings mean that they can lay their eggs and raise their brood out of the reach of natural predators like foxes. More seagulls surviving means less food to go around, and that has turned them into vicious pecking machines with a liking for extreme violence in their search for sustenance.

That makes bins, rubbish dumps, and recycling centres a natural target for feathered death from above, and the one thing between them and their target are our day-glo clad heroes, armed with nothing but a broom and their wits.

People feeding the gulls, either in city centres or the seafront, only encourage them to associate human activity with food, to the point that they will swoop in and steal it out of your hand.

And it’s a psychological battle, as it’s very much frowned upon to actually hurt or kill a gull, so it’s more about deterrence than resorting to violence to end this bewildering war.

Mark Hall of Divert.co.uk say: “That means homeowners, landlords and businesses should make their rooftops unwelcoming for gulls so that numbers might gradually decline.

“Food waste should be well wrapped to prevent the birds getting a whiff of your half-eaten kebab.”

“But most of all – Tourists and city folk: PLEASE Stop feeding the gulls. We’ve seen enough pecking injuries in the refuse industry to last a lifetime.”

www.divert.co.uk

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S&P Global/CIPS UK Construction PMI^®

KEY FINDINGS

Civil engineering and housing activity fall in July

Commercial work expands at weakest pace for 18 months

Supplier delays least widespred since February 2020

 

COMMENTS:

Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey

“July data illustrated that cost of living pressures, higher interest rates and increasing recession risks for the UK economy are taking a toll on construction activity. Total industry output fell for the first time since the start of 2021 as civil engineering joined house building in contraction territory. Only the commercial segment registered growth in July, supported by strong pipelines of work from the reopening of hospitality, leisure and offices.

“More positively, input cost inflation has retreated from the peak seen this spring as lower commodity prices and supply improvements gradually filter through to buyers of construction products and materials. The latest round of purchase price inflation was the least marked for 16 months, despite sustained pressure from escalating energy costs and staff wages, while supplier delays were the least widespread since the pandemic began.

“Expectations for output growth in the next 12 months are far less exuberant than those seen over the past two years, amid concerns that elevated inflation and higher borrowing costs will constrain demand. Nonetheless, the degree of construction sector optimism picked up slightly since June, which ended a five-month period of falling confidence.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply

“After several months of difficult conditions for builders, these challenges have now resulted in a contraction in construction with the biggest fall in activity since May 2020.

“This disappointing result was felt across all the sectors, including housing which had demonstrated more resilience over the last couple of years, but fell for the second month in a row in July. However, it was civil engineering that fell the hardest and furthest. With fewer new orders in the offing, it may be some time before we see a rebound in this sector bearing in mind the time lag of infrastructure projects.

“Builders optimism remained at the lowest levels seen for two years. Job creation was healthy to complete work in hand but the danger remains that should the UK economy turn unfavourable, this will affect job hiring and the development of key skills. A feather-like fall in prices may ease some of the pain as access to raw materials also improved, but prices at historically high levels will continue to hamper activity in 2023.”

Brendan Sharkey, Head of Construction and Real Estate at MHA

“The UK construction sector continues to ride a wave of strong demand, despite the persistent pressures of inflation, labour shortages and the cost of living crisis. Prices have stabilised for some basic materials such as timber, bricks and certain steel products. Overall, businesses have adapted to the inflationary landscape including changing their methods of purchasing thereby bolstering performance across the sector.

“Housing demand, particularly outside of London, continues to be fuelled by an increase in disposable income due to the switch to remote working and high levels of employment. The levelling up agenda and Commonwealth Games have also played a role, positively showcased cities including Birmingham and Leeds as great places to live, contributing to the housing boom in these regions.

“However, in the months ahead housing demand will inevitably decline as the cost of living crisis continues to bite. Today’s expected interest rate rise, which could see the base rate increase by 50 basis points, alongside increased travel costs, general inflation and reduced employment will also prompt many consumers to put their needs for a new house on the back burner.

“Many businesses will be closely monitoring developments in the conservative leadership election over the month ahead. A reduction of the planned 25% corporation tax cut, a review of the HS2 extension and reduction of red tape on building new homes (mooted by both candidates) would help the sector power through the difficulties ahead. Yet for now, this just remains speculative and come September it may be a very different story.”

Fraser Johns, Beard finance director

“The largest fall in construction activity since February 2020 confirms the view that the next 18 months is likely to be slower for the sector.

“However, there is also an element of market correction taking place as the pent-up demand following the pandemic begins to subside. This is probably why commercial work – which bucked the downward trend – is expanding at its weakest pace for 18 months.

“The reduction in supplier delays is encouraging, the continued delays on some imported items from China and Europe remain a concern.

“Skills shortages continue to be an issue for our sector. Recruitment of staff is a challenge for all industries. We are working hard to attract a diverse and inclusive workforce by offering incentives and opportunities for development at all levels, from apprenticeships to senior managers.”