The score for '24 and what's in store for 2025
December 5, 2024
There’s no doubt 2024 has been tough on construction businesses. A sluggish economy has meant fewer consents, and many homeowners are choosing to revamp their homes with smaller DIY projects rather than full renovations. Still, green shoots are already starting to appear. Whether the recovery is gradual or sudden, many industry operators are getting ready for an upswing in 2025.
In August, consents dropped by 5%, and over the past year, they’ve fallen by 20%. In its October market report, EBOSS is optimistic we’ve hit the bottom for consents, seeing a slow but sure residential recovery and a more stable commercial market.
Waihanga Ara Rau, the Construction and Infrastructure Workforce Development Council, is even more positive, releasing a study showing one of the big issues for construction businesses – the brain drain – may start to ease soon. The wage gap between New Zealand and Australia is shrinking, while Australia’s high taxes and cost of living are also making it less attractive for skilled tradies to cross the ditch.
According to Waihanga Ara Rau Chief Executive Philip Aldridge:
“There’s no denying New Zealand’s recession and current lack of work, but it’s temporary. Within 12 to 15 months, major projects will be kicking off, interest rates will drop further, and demand for skilled workers will surge. Australia may look appealing now, but short-term gains should be weighed against New Zealand’s long-term potential.”
October and November saw big cuts in the Official Cash Rate (OCR), with further cuts expected into 2025. While the effects will take time to kick in, lower mortgage rates could see consumer demand rising again.
Lower finance costs will also help get new developments off the ground. One of the more encouraging trends this year has been that construction costs have started to fall back below the long-term average. Alongside this, the government has introduced a range of supportive policies aimed at cutting red tape and costs in the build process and improving housing affordability.
Key reforms include exempting small home renovations from paying the building levy and soon, allowing professionals to self-certify certain builds. Qualified building professionals, such as plumbers, drainlayers and builders, will be able to self-certify their own work for low-risk builds, without the need for an inspection. The government has also announced plans to make virtual inspections the default across the country, to speed up the process.
This won’t just benefit employment and businesses’ bottom lines, but the environmental sustainability of the sector. An August Master Builders survey of more than 1,000 owners of newly built homes found that while 78% considered sustainability in their builds, around a quarter had to sacrifice sustainable options due to affordability. As costs ease, more clients may be willing to invest in sustainable building practices or products that carry a higher upfront price tag, but offer longer-term savings.
After a bumpy ride, we are looking forward to a smoother road ahead in 2025.
