KiwiBuild chances questioned after construction sector meltdown

Bayly questioned KiwiBuild's prospects, after issues in the construction sector. Photo/Duncan Brown

National's Building and Construction spokesman says the Government's KiwiBuild plan could be threatened by construction sector issues but a minister has said those issues are dogging high-rise or commercial building rather than residential construction.

Andrew Bayly, who is also National's associate finance spokesman, said he had concerns about KiwiBuild's chances and Housing Minister Phil Twyford's expectations after construction sector issues including Ebert Construction's receivership last week, with estimated debts of around $40 million.

"I hope Mr Twyford actually achieves what he's going to do with his 100,000 [new home] target because I think that's good for New Zealand but my view is he's going to really struggle to achieve that because I doubt he's put in place the building blocks to make sure you can get to the stage where you are building an additional 10,000 houses a year," Bayly said.

Twyford, Infrastructure Minister Shane Jones and Building and Construction Minister Jenny Salesa spoke at the Beehive yesterday after a meeting with construction industry representatives, with Salesa saying Government agencies would be reminded of procurement guidelines on projects to ensure they set a good example.

A spokesperson at Twyford's office said yesterday issues in the construction sector were predominantly in the "vertical" or high-rise space, not the lower-rise residential sector.

Ebert was building two big Auckland apartment projects: Library Lane at Albany and Union Green in the CBD. However, KiwiBuild is mainly a suburban residential plan.

Stephen Barclay, KiwiBuild chief executive, is due soon to appoint 10 private developers to build some of the first 1000 homes, mainly apartments, and some of these could be on previously stalled sites. KiwiBuild homes are up at McLennan, a new housing development in Papakura.

But Bayly believes such a big national housing programme could exacerbate existing construction issues, putting more pressure on the already stretched sector.

"Everyone says we have constraints around builders and people so to overlay that with another 10,000 principally in Auckland, you actually need to change the dynamics and what I haven't heard enough of is about training, I don't see changes to the consenting arrangements, I don't hear a whole raft of industry changes to actually make sure we get that real change that does need to occur.

"I think Mr Twyford is running into a market that's going to go against them because with the uncertainty in the economy and the uncertainty of what's happening in the construction sector and price escalating 7 to 8 per cent over the last couple of years per annum, we've got small firms that are involved in these projects having to rely on construction contractors who will price it at one point but 18 months later you'll have big price increases through shortfalls and that's why they're getting caught out," Bayly said.