17 per cent Auckland building inflation raises Labour's ire

Auckland building sector inflation is worrying Labour. Photo/Mark Mitchell

Auckland building costs rose 17 per cent in the past year compared only 7 per cent nationally, a trend Labour's Andrew Little says illustrates a dire situation.

Using Statistics NZ material, Little said Auckland building consent costs rose from $1846/sq m in the year to March 2016 to $2153/sq m in the latest March year. That compares to the national rise from $1812/sq m to $1946/sq m, he said pointing to the official data.

"Building costs in Auckland rose 17 per cent last year. We need change to build affordable housing," Little said. "Clearly, the Auckland building industry is struggling to get the workers to keep up with demand

"The building industry has high materials costs, 30 per cent above Australian levels, and the small scale of firms increases costs further.

"To bring more affordable housing to the market it's essential we need to bring the cost of construction down," Little said.

"We must supply more houses at the affordable end of the market and Labour's plan for this is our KiwiBuild programme, which will use scale to reduce prices and will ease the boom/bust cycle by creating strong, steady demand," Little said.

"There's a number of ways we can achieve this and Labour's already said we'll help finance the construction of a house-building factory in Gisborne, to reduce building costs, and use the Affordable Housing Authority to reduce red tape costs for large-scale projects," he said.

New Zealand inflation is running at 2.2 per cent, the Herald reported last week.

Rising building costs have resulted in many big Auckland apartment projects being cancelled and last week, the Chinese developer of the $200 million Park Hyatt in Auckland's Wynyard Quarter complained about cost escalation, saying the project was over budget.

Chiu Yung, chairman of Fu Wah International which is developing the hotel, said he was seriously considering postponing a planned second hotel until the Auckland construction market was in "a more competitive space" and less expensive.

He advocates a construction materials fair or expo so companies from overseas can come here to promote their products, introduce more competition and ease the tension on the construction market here.

William Lindesay of Vincent St-headquartered luxury house builder Lindesay Construction, estimated cedar prices had risen about 40 per cent in the past year. This was due to its popularity as a cladding material and he said it was often difficult to find good product.

"There's a shortage of cedar. Timber framing [generally] is going up 15 to 20 per cent annually. Concrete prices have been going up, but it's more of a supply problem. We used to order concrete in a day. Now, it takes three weeks. That's shifted how we plan projects," Lindesay said.

"We're hearing inflation in the sector is more than 10 per cent, it's nearer 15 per cent," he said of overall price rises.

New Zealand's biggest construction business, Fletcher Building, last month downgraded its June 2017 full-year operating earnings guidance by $110 million.

Chris Hunter, NZStrong chief, says now is the most dangerous point in the construction cycle because prices are rising so fast and he wants a more collaborative approach taken by builders, designers, subcontractors and others.