Coronavirus: Builders, tradies worry about keeping contracts after lockdown lifts

Saturday, 11 April 2020

Before Covid-19, builders were gearing up for another surge on the Auckland property market, an industry specialist says.

Builders and other tradespeople are beginning to see clients backing out of contracts as they become concerned for their own financial futures.

Mike Craig of Mike Craig Builders in Kapiti, said about half his upcoming work had been put on hold.

'I think the main reason is people's nervousness about going forward, about their jobs, and of course some of them have got to sell their houses.'

One of his clients had intended to pay by cashing up a share portfolio but its value had sunk with the sharemarket.

Northland plumber Hayden McCaw of IPlumb4U, with his wife Shannon. McCaw started out three years ago and is optimistic that local support will keep him afloat.

* Almost 200 construction projects impacted by Covid-19, new report says

* Lockdown will 'kill' construction companies, 'unless Government acts'**

Residential construction is a notoriously cyclical industry with big booms and busts.

Infrastructure New Zealand has warned that nearly one-third of construction staff may be laid off in the next three months, and firms providing advisory and other support services might be in the same situation within six months.

However, Hayden McCaw, a plumber in Whangarei with five staff, was optimistic that word of mouth and community connections would keep his company in work after the lockdown lifts.

Kapiti builder Mike Craig says there are a number of ways the Government could step in to keep builders in work.

As essential workers, plumbers were still on call. He was going to the jobs himself so that if he felt at risk, he would not feel under pressure to complete the job.

His staff were a tight crew. 'They wouldn't care if we came back and we painted houses, just so we could stick together.'

Peter McMenamin, managing director of architecture and design management firm buildBIM, was not as optimistic.

Most of his 26 staff were able to work from home but the outlook for the building sector was extremely hard to predict.

'The builders I've talked to have pretty much gone into hibernation, those kind of small to mid-sized guys. And they've actually all paid their bills, that's what struck me.'

Before the lockdown, the industry had been gearing up for expansion because the Auckland property market was showing signs of growth after going flat for two years, rather than falling as expected.

Fortunately, McMenanim said, his firm mostly worked on subdivisions or for commercial clients, and it had about five to six months worth of work in the pipeline.

However, he had had to lay off three staff in Chile after work dried up, and the team in New Zealand had gone down to four days a week.

'Our objective is to hold onto cash and hold onto our best people so we can ride through whatever comes,' he said.

Developers he knew were taking a long-term view, and they would probably be able to get builders cheaper than before.

But 'obviously a lot of construction comes from land being sold and if people don't want to buy land, then they're less likely to build'.

'So the big firms might ride it out with big contracts but the smaller firms will probably struggle if residential struggles.'

Grant Florence, of Certified Builders, believes strong order books will save the day for many builders.

Certified Builders chief executive Grant Florence did not think the loss of work was widespread just yet.

'From the perspective of the small builder who I represent, I think they're looking forward to lockdown being lifted. They have strong order books so they're anxious to be getting back to it.

'In most cases where there has been a contract in place, there's been a long lead-up of up to two years' ahead of time.'

As to what the post-lockdown building sector should look like, the jury was out, buildBIM's McMenamin said

'You really don't know. This could be a massive driver for New Zealanders to come back to New Zealand and we've got a lot of Kiwis offshore. They probably all have reasonable money and they probably all want to live in reasonably nice suburbs. Who knows?'

But if property values took a deep dive, 'it's not going to give the people trying to sell houses [confidence] and people aren't going to build on that basis.'

Mike Craig suggested the Government could keep builders in work by bringing in a special consenting service to fast-track the resource management process.

Another idea might be underwriting houses built on spec, he said. If the houses did not sell, the Government could use them as state houses, a feat that Kiwibuild had tried to do but not really been set up for that process.

'Land is the other thing. We need the Government to become a little bit of a land developer.'

The impact on the building industry would be huge, Craig said, and he hoped the Government would look more broadly at measures such as reducing GST and supporting youth employment.

'It's all about confidence, if you can get the confidence back, and I don't think throwing money at people is the way to do it.'