The construction sector has been in the doldrums for the past few years. We have been struggling for work and things are generally getting worse.
As a result, companies have had to restructure their business and lay off skilled staff and apprentices who have either gone out on their own, left the sector altogether or gone overseas — in particular, to Australia.
We have been building around 14,000 to 15,000 new homes per annum for the past couple of years, and many pundits are predicting a slight decrease this year.
So the sector has shrunk to a level equal to these statistics, although there is spare capacity for growth in the short term should the work rebound at a steady pace (and we are all hopeful of that).
Now, factor in this. From what we know to date, Canterbury is going to need about 10,000 new homes and repair to about 100,000, though these figures may change as assessments are completed.
There is a general consensus that there is a pending housing shortage in Auckland which may be as high as 20,000 at present.
Furthermore, the Financial Assistance Package currently being considered by Parliament is designed to cap the Crown and BCA contribution towards fixing leaky homes at 25% each. Some 20,000 odd houses (potentially more) may qualify for the funding which will hopefully start getting these properties fixed over the next five years.
There will eventually be a pick-up in general demand for housing as the economy recovers and, of course, there are the 5000 to 10,000 temporary homes needed in Canterbury to house those whose homes are being repaired or rebuilt.
We also know there is likely to be a high demand for non-residential accommodation in Canterbury as large amounts of the CBD need rebuilding, and temporary accommodation may also be required.
Add to this the infrastructural demands and you start to get a picture of what NZ Inc is facing from a labour and skills perspective.
I think we also have to consider the effect of the situation in Japan, and the floods, fires and cyclones in Australia as, undoubtedly, those areas will also be looking for resources and materials in their rebuilding programme.
Even if my very rough calculations are out by quite a bit, and we don’t know the timing of some of these things, I think it is still a pretty fair synopsis to say we have a major skills shortage looming of quite large proportions, and for a reasonable length of time.
We also face a redistribution and concentration of human capital that we have not seen before to Canterbury (as a result of the quakes) and to Auckland, due to fact that most leaky buildings are located there and the pressure that is building due to a housing shortage in the region.
All this will affect prices for wages and materials, which will put pressure on inflation and the Reserve Bank will have to respond in the only way it can — with higher interest rates.
So there really is a window now for the public to get that new home built or that renovation done before the pressure starts to mount and they cannot find a builder for love nor money, and prices and finance costs escalate.
So what do we do about this skills shortage? Work is currently underway with all the main training providers — the Government (Department of Building and Housing, Department of Labour (with regard to immigration), and Work and Income NZ), Business NZ, BRANZ and sector groups — to develop a plan and solutions to these issues.
At the end of the day, whatever we come up with has to maintain and build our skill base, provide certainty for employers and home owners regarding the capability of those being engaged, and to avoid being bogged down in red tape.
We must ensure we maintain quality and consumer confidence in the buildings we construct, although we may need to go about it differently given what we face.
We certainly don’t want another sector crisis to deal with in 10 to 15 years’ time similar to the leaky buildings syndrome we face having to fix now.
But I am sure with the right approach we can develop a regime with the right balance, incentives and outcomes where we all prosper.