RMBA president Kerry Archer says it’s going to be tough going for the building industry this year. He asks if you’re going to be the guy sitting and waiting for something to happen, or the guy who’s on his feet, “pumping the boat” and making things happen?
Christmas breaks are all done and dusted and are a nearly distant memory once again.
I hope everyone managed to get some down time away from their day jobs, and enjoyed some time with family and friends over Christmas and the New Year.
With the fantastic summer weather the country experienced, there were no excuses for not getting outside and remembering how lucky we are to live and play in such a beautiful place.
Unfortunately, Santa was not listening — or maybe I had not been good enough during the year — but the issues that our industry faced last year are still front and centre stage, and playing a huge role in disrupting what we do daily.
Supply chain issues, staffing, cost escalations and, of course, the latest Omicron variant, are here to stay, and I don’t see them getting any better in the next 12 months.
Many industries, from agriculture to retail, are all struggling with these same issues, and so construction does not stand alone in this, with all being in the same boat.
Speaking of boats, I am sitting here writing this and, looking out of the window I see there is a yacht race going on, but it’s missing one thing — wind.
There are about eight small foiling yachts on the water with one person sailing each of them, without a breath of wind to be felt.
Some of the sailors are basically just sitting on their backsides waiting for something to happen, while some are pumping the boats with their feet, willing them to move faster.
Guess which ones are going somewhere — albeit slowly — but they are moving forward.
This is like the building industry at the moment. We’re struggling with the basic needs, just like the sailors and the lack of wind, but which one are you — the guy sitting and waiting for something to happen, or the guy who’s on his feet, pumping the boat and making things happen?
Looking at the numbers from Statistics New Zealand, it’s no wonder the industry is under a bit of pressure.
There were 48,889 new homes consented in 2021. This was a 24% increase from 2020 and, going back a bit further, a 63% increase from 2016.
To put this in dollar terms, the total value of residential construction was up 29.2% from 2020 to $18.8 billion, excluding land. This does not include alterations to residential properties at $2.4 billion, and non-residential construction at $8.19 billion.
That gives us a total construction value across residential and commercial building of $29.39 billion dollars, up 24.1% from 2020.
So, while we can look to Covid, shipping and other issues for some of the problems we are experiencing, one of the biggest problems is the sheer volume of work we are trying to get through.
Any industry trying to increase its output by 24% over a 12-month period would be struggling.
Some of the predictions are that we will see a drop in activity later this year, but even with such a large increase in activity last year it’s still going to take time to catch up.
I believe one good thing that has come out of this is that wages are increasing. In my eyes, tradespeople have always been underpaid for the work they do, and with a shortage of quality staff available, this is pushing up charge out rates which, in turn, results in higher wages being paid.
The downside of this is the increase in poaching of staff occurring at present. I’m hearing a few complaints of people coming onto sites and offering employment.
I’m sure we have all experienced losing a staff member like this and being annoyed about it, so remember that feeling if you’re contemplating doing this yourself.
While an extra couple of dollars an hour is a good incentive, if you’re providing a good environment for your workers then money is not the only reason for staying.
So, make no mistake, this year is going to be tough to negotiate, and there will be some casualties which is never easy on all parties involved.
You need to keep an eye on the expected price increases and drawing up your contracts so you can pass these on to clients.
Cash flow is king at times like this, so make sure you’re keeping a close eye on your finances.