Construction Costs in New Zealand Continue to Rise

The housing industry in New Zealand is booming, but experts expect that construction costs will also rise with the demand. This is creating major problems for developers who are unable to keep up with the changes.

Residential and Commercial Buildings become more Expensive

Construction costs for residential building increased by 6 per cent in 2016 — a figure which is higher than the 3.7 per cent long-term average. Building costs for commercial structures, on the other hand, saw a 5.6 per cent rise last year. The cost sharply rose during the December quarter.

Companies Blame the Lack of Skilled Workers for Rising Cost

While construction companies can rent equipment, such as forklifts from Auckland Fork Truck Hire, to improve operational efficiency, a lot of them are blaming the shortage of skilled workers for the increasing cost of construction projects. The lack of workers is also driving up their workers’ wages. A skilled forklift driver, for instance, can earn up to $60,000 a year, which is $5,000 more than the average annual income in New Zealand.

According to the Building and Construction Industry Training Organisation, the industry needs around 64,000 new tradesmen over the next five years to match industry growth, as well as to replace those that leave.

Expensive Cost of Rework

Some directors also find problems with expanding their business. They say that expanding leads to a lot of rework. Reworks on a project usually erode margins.

Busy Days Ahead for Auckland

There is some serious construction going on in Auckland in particular, considering that 72 cranes presently dominate the city’s skyline. Non-residential building consents also set a record of $1.82 billion for the year to March.

Researchers expect the cost of a non-residential building to peak at 7.4 per cent in September, before settling to around 4 per cent by December of the same year. In order to reach the demand without compromising building quality, companies should focus on hiring skilled workers.