for public release

16 June 2017

First National blames bureaucracy and short sightedness for GDP fall

First National Real Estate Chief Executive, Bob Brereton, says it is ‘insane’ that national GDP has fallen at a time when activity in the building sector should be at record highs and asserts that bureaucracy and short-sighted policy planning are to blame.

New figures, released yesterday, show that the New Zealand economy expanded by half a per cent in the three months to March – however this figure was below forecasts and was actually a decrease of 0.1 percent when measured on a per capita basis across the whole population. Statistics New Zealand says that this was primarily the result of much lower building activity and noted that construction fell 2 .1 per cent, with all building sectors showing a fall.

However, Mr Brereton questions how this could be the case.

“The latest GDP figures are down at a time when growth should be booming on the back of massive building demand. We have a huge undersupply of residential properties in Auckland, the apparent wind-up of large scale green field and brown field developments in Auckland and a large-scale expansion of development throughout the Bay of Plenty. So how can GDP be down”?

Mr Brereton blames the ‘usual suspects’ of consenting, finance and labour for the drop.

He said he was pleased to see that quicker consenting was a key recommendation of the Mayoral Report on Housing but believed that action had to be taken now to get this issue resolved.

“The consenting process is still taking way too long making it much more difficult to get a project to completion - as highlighted by the 9 year wait for approval for a development in Three Kings, finally approved earlier this week. While that example might be at the extremes – most projects are experiencing significant displays and it’s simply no longer acceptable”.

Mr Brereton also highlighted finance and credit restrictions as another leading obstacle to building growth.

“The difficulty in obtaining credit for small to medium size developments is a real obstacle to ramping up activity. We have a building sector that wants to get on with it and a Reserve Bank that seems intent on killing growth at any cost”.

Mr Brereton said that the third barrier to building growth was a shortage of labour.

“It simply isn’t there. Builders are pricing jobs at a level that ensures that they don’t get them because they have work lined up, in some cases, for years in advance. We need more qualified builders, urgently – but the issue needs cross party and local government support, not just by the politicians but by the bureaucrats that manage the systems”.

Mr Brereton said that he doesn’t believe that the current lull in Auckland house prices can be sustained while these three obstacles continue.

“High demand and low supply equals price increases. We can strangle demand, for a while, with tightening fiscal policy but ultimately we’ll just exacerbate the supply issue and make the problem even worse. Less interference would let the market find its own equilibrium”.

ends

© Scoop Media