Building Industry Revival

23 April 2012

We pick a slow recovery in activity throughout 2012.

The Christchurch rebuild will definitely help the aggregate stats but we need a more broad based recovery.

There is a huge backlog of remedial work which includes leaky building repair and also the      upgrading of commercial and government buildings to reach the earthquake standards required by law and to satisfy insurers and financiers. How all this will be paid for no one really knows. Logically tenants or owner occupiers will have to pay but in current economic conditions large increases in real or imputed rentals are   simply unaffordable.

 

We pick a slow recovery in activity throughout 2012.

The Christchurch rebuild will definitely help the aggregate stats but we need a more broad based recovery.

There is a huge backlog of remedial work which includes leaky building repair and also the      upgrading of commercial and government buildings to reach the earthquake standards required by law and to satisfy insurers and financiers. How all this will be paid for no one really knows. Logically tenants or owner occupiers will have to pay but in current economic conditions large increases in real or imputed rentals are   simply unaffordable.

In that respect much of the earthquake prone Wellington commercial building sector is a    basket case.

The actual national cost of the Christchurch earthquakes is much, much greater than the 20 billion dollars of direct costs so far estimated. Those indirect costs, such as the on flow to areas like Wellington are frightening.

So some parts of the industry will be very busy but the onflow to timber demand is very hard to estimate. This is because it is such a unique kind of recovery. It would be lovely to see a traditional recovery with house builds getting back over the 20,000 pa mark but we think this unlikely.

The main reason is not the investment capability of prospective owners (especially with interest rates at historic lows) but rather a crisis of confidence.