Chief’s Chat – State of the Sector
8 September 2022
LESSONS FROM THE PAST, STRATEGIES FOR THE PRESENT
It is no secret that our sector is facing numerous challenges. Supply chain disruption, skilled labour shortages, price inflation and a host of other issues continue to place pressure on us. But having recently attended our Constructive Forum in late August, I feel the sector has strong resilience, and a renewed sense of optimism, that will help guide us through the coming months.
The theme of Constructive this year was ‘Insights for Building New Futures.’ We heard from builders, industry leaders, regulators, and other stakeholders on lessons from the past, alongside strategies for the present. It was particularly interesting to hear from Minister of Building and Construction, Dr Megan Woods, and Leader of the Opposition, Christopher Luxon, who gave keynote addresses outlining their thoughts on the sector.
A resilient sector, well positioned to navigate headwinds
At Constructive, we released the results of our annual State of the Sector survey, which identifies the biggest challenges and opportunities facing the sector. For the first time, the survey explored both the supply and demand sides of construction. Over 1,200 sector participants and homeowners who had built or completed a significant renovation in the past three years responded to questions about their experience building, the economy, critical issues they were facing, and their outlook for the sector.
The key insight was that while 79% of sector participants think the economy will deteriorate over the next 12 months, only 31% of builders think their own businesses will be worse off. We see this as a sign of underlying resilience in the sector. Many of us have strong order books and consent numbers remain high. Homeowners feel similarly, with nearly half (45%) saying they would recommend building in the current environment.
But the challenges remain. Cost escalation (96%), supply chain disruption in concert with product availability and increasing product substitution (95%), and skill shortages (67%) were identified as the three most critical challenges facing the sector, all an increased proportion on the year prior. This is impacting the mental wellbeing of the sector, with 87% of respondents noticing a rise in stress or mental health issues in their business over the last 12 months. For some the order books are also starting to slow down.
We take the challenges identified in the survey seriously and use them to inform our ongoing advocacy work. A prime example of this is our latest work in consenting.
A centralised approach to consenting
Consenting remains a considerable hurdle for many of our members. This year’s State of the Sector Survey found that 80% of respondents are impacted by consenting delays, with over half of that experiencing delays of three months or more. These delays cause cost overruns and increase risk for both builders and homeowners.
Master Builders submitted on the Ministry of Business, Innovation and Employment’s (MBIE) review of the building consent system in early September. Our central argument was that processes are inconsistent across the 67 different Building Consent Authorities (BCAs), which leads to unnecessary duplication and an unresponsive system. We also said that BCAs often take an overly risk adverse approach, employ outdated processing technologies, and sometimes have internal inconsistencies between staff-members and contractors.
We recommended a range of solutions. Our primary recommendation is to consolidate the number of BCAs and develop a proper national consenting approach to ensure that the building code is applied consistently nationwide. Others include a mechanism for the sector to flag inconsistent outcomes with MBIE, merging consent processes based on volume and development size, strengthening the technical capability at MBIE, requiring BCAs to utilise online technology, and streamlining consents based on complexity and risk. We’ll keep you up to date with our progress towards building a better consenting system for the sector.