Construction Slowdown Impacts Build Pipeline - Project Starts Down 64% With Project Enquiries Down 61%

Auckland, 12 August 2024 – The EBOSS 2024 Builder Sentiment Report, funded by the BRANZ Building Research Levy, brings together significant data from a survey of over 650 New Zealand builders, highlighting the impact the economic downturn is having on the construction industry, with builders expecting that the slowdown might persist for at least another year.

The EBOSS Builder Sentiment Report highlights that 70% of builders surveyed believe the industry conditions will continue to decline over the next 12 months — following a notable downturn in the past year.

Moreover, 67% of builders reported seeing less demand for their services (compared to the same time last year), with 38% noticing an increase in the number of projects being put on hold, and 34% noting an increase in project cancellations.

Building companies are now at just 67% capacity on average, coming down from a peak of 83% in 2022. Concerningly, the number of businesses that are only working at 0 - 49% of capacity has more than quadrupled — from 5% in 2022 to 21% in 2024.

“A combination of factors — rising interest rates, increased material costs, and broader economic conditions — has led to a decrease in construction demand, perpetuating a cycle that has already led to the closure of several building companies, with many others struggling to stay afloat,” says Matthew Duder, Managing Director, EBOSS.

“Smaller businesses in particular are doing it tough — sole builders are at just 57% capacity on average, and companies of two to five employees are only at 63% capacity. These businesses typically focus on residential work which has seen an earlier downturn than the commercial market.”

Looking ahead, builders don’t believe the situation is likely to improve in the next year. The number of imminent project starts is down 64% compared to 12 months ago, and project leads and enquiries are dwindling — down 61% compared to the past 12 months.

“There is much less forward work on the books than builders have experienced over the past few years — sitting at 8.6 months on average, compared to 11.2 months in 2022,” says Duder.

“Again those numbers are looking worse for residential builders, and overall just under a third of those surveyed said their business has just zero to three months of forward work left.”

When asked how they’re coping when managing the business compared to 12 months ago, 70% report it is more difficult to keep the pipeline full, and 67% say it is more challenging to maintain profit levels.

“A silver lining is that staffing levels have now improved,” says Duder. “Just 15% are reporting a shortage of skilled staff, compared with 33% at the peak of the post-Covid boom.”

In addition, the survey also asked builders to identify areas where efficiency can be improved in the building process, following StatsNZ reporting it took 569 days to build a house in 2023.

“For builders, a big opportunity to increase efficiency is in improving the council compliance process,” says Duder.

“Building design and detailing was also identified by two-thirds of builders as an area with room to improve, closely followed by upskilling and training onsite and documentation. Overall builders are seeing that there is not one but several areas where there is opportunity to increase efficiency — with a need for different parties to work collaboratively to find solutions and streamline the build process.”

The survey also gathered feedback on changes to the Building Act to remove the requirement for local certification, making it easier to build with building products certified in a trusted jurisdiction overseas.

When considering Interior and Finish products, such as tapware, finished flooring and light fixtures, 64% of builders believe the change will be beneficial, but the level of confidence drops when considering a wider range of other products — particularly in the Structural and Fire categories. Several builders also shared concerns about the risks of products not necessarily suited to New Zealand’s specific weather conditions.

“For example, with structural and passive fire products, builders feel that more consideration is needed to ensure the products meet the requirements laid out in the New Zealand Building Code,” says Duder.

“And when it comes to Enclosure products such as weatherboard cladding and roofing, builders are cautious about overseas certified products, highlighting potential issues including leaky buildings, increased liability, and the possibility of substandard construction.”

Duder adds that Builders in the survey are calling on the government to not treat all products as equal.

“Although there is general support for the proposed change, care needs to be taken in implementation to avoid a repeat of something like the Leaky Building crisis,” says Duder.

With the government proposing changes to make product substitutions easier for builders and trades, the survey also asked builders about their level of confidence in substituting different products.

A number of categories fall into the ‘easy substitutions’ category — likely to be substituted relatively often with minimal concern — including decking, hardware and kitchen joinery. Foundations, framing, and roofing fall into the ‘avoided substitutions’ category — with builders needing significantly more support to feel confident in making those substitutions.

Finally, the survey asked a question on the government’s proposed design rule changes to structures less than 60m² (granny flats). The overall response was positive, which the government should see as a positive sign that the industry feels comfortable self-assessing this type of building work. 69% of builders believe it is a good idea to have granny flats exempt from the standard council process, and 73% saying they would feel comfortable to sign off on the work without the council’s approval and sign-off.

2024 EBOSS Builder Sentiment Report Key Findings:

Industry situation:

• 70% of builders believe the overall condition of the industry will continue to decline over the next 12 months
• Net sentiment is at -46 (percentage of those surveyed predicting a decline, minus percentage of those predicting an improvement).

Demand for building work:

• 67% of builders report less demand compared to the same time last year
• Only 12% report an increase in demand compared to the same time last year
• Workload has decreased from 83% capacity in 2022 to 67% capacity in 2024
• The number of building businesses working at 0 - 49% capacity has more than quadrupled
• Smaller businesses of are hardest hit, with sole practitioners at just 57% capacity on average

Construction pipeline:

• 38% of builders have seen an increase in the number of projects being put on hold compared to 12 months ago
• 34% have seen an increase in cancellations compared to 12 months ago
• 61% say the number of leads and enquiries is lower compared to 12 months ago
• The number of imminent project starts are down 64%

Forward workload:

• 31% of builders say their business has just 0 - 3 months of forward work on the books
• Average forward workload is down to 8.6 months, compared to 11.2 months in 2022
• Forward workload is lower for residential builders, at an average of just 6.8 months, compared to 10.8 months for those solely focussed on commercial work

Managing the business:

• 70% of builders report it is more difficult to keep the pipeline full compared to 12 months ago
• 63% of builders report they are finding it more difficult to convert enquiries compare to 12 months ago
• 67% of builders find it more challenging to maintain profit levels compared to 12 months ago
• Staffing levels have improved, with the number of builders reporting a shortage of skilled staff reducing from 33% in 2022 to 15% in 2024

What’s impacting efficiency?:

• 76% cited council compliance as one of the key factors impacting efficiency of residential projects
• 66% cited design as impacting the efficiency of residential projects
• 41% cite onsite experience and training of staff as important for improving the efficiency of residential builds

Feedback on proposed government changes for granny flat structures:

• 69% of builders are supportive of the government proposal to make it easier to build ‘granny flat’ structures of up to 60 square metres
• 73% of builders say they would feel comfortable in their role of Licensed Building Practitioner (LBP) to sign off on the work without council’s involvement

Feedback on proposed government changes to allow for overseas certification:

• 64% believe products in the interior/finish category (eg. tapware, carpeting and bathroomware) would benefit from the change, and 50% believe thermal products would benefit
• Only 29% believe products in the Structural category will benefit from this change, and just 25% believe products in the Fire category will benefit

The survey of 659 New Zealand builders (including LBP Site 1, 2 or 3 Builders, LBP Carpenters, Project Managers and Other Builders), conducted by EBOSS and funded by the BRANZ Building Research Levy, is part of a biennial research programme that aims to provide an update on the current and future state of industry sentiment.

The EBOSS 2024 Builder Sentiment Report is available online here: https://www.eboss.co.nz/construction-industry-confidence-report/builder-sentiment

About EBOSS
Established in 2006, EBOSS connects building product suppliers with New Zealand’s architectural, design and construction community through their significant online product library, electronic publications, and industry events.

EBOSS keeps the industry informed through their regular research programme, which includes past reports into BIM use in NZ and the Building Industry Supply Chain, biennial Industry Sentiment Reports, and the EBOSS Pulse report which summarises demand indicators for residential and commercial construction.

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