Differing expectations for 2023

Builders’ Business is a column by builders for builders. Its objective is to provide a forum, particularly for small business operators, in which to share knowledge, experience, tips and ideas

Q. Are you seeing any signs of the industry slowing down?

Firm: Main Frame Limited

Interviewee: Rick Pettit 

Role: Managing Director 

Location: Queenstown

Staff: 5

I’m not seeing any signs of the industry slowing down from a personal point of view. We’re booked up for the next 18 months, mainly on one project, but there are two or three others that people want me to do. I still have five people working for me, including my son, who I hope will take over the business once I hang up my boots.

I think the demand is driven by the fact that there’s a major shortage of houses in Queenstown. It’s the only place in the country where property prices are going up and, from our perspective, things are buoyant.

Luckily for me, I’m fairly insulated from high interest rates or recessions, as I build high-end houses for clients who have plenty of money. I remember during the crash of 2008, when the New Zealand dollar tanked, my clients weren’t put off by any of that – they just wanted their job done. At the top end of the market, you’re less likely to suffer from hikes in interest rates or exchange rate slumps.

I have found it more difficult to finish projects this year. Finding labourers is a real issue; for example, I’ve lost two guys to other firms, because they could offer much higher wages than I can. I would say that staffing is our biggest issue. Pre-Covid I had Brazilians, English and Irish working for me, but we don’t see them any more, as they can’t get in!

 

Firm: A1 Homes

Interviewee: Rob Southey

Role: Director

Location: Wairarapa

Staff: 7

We’re definitely seeing the industry slowing down and we’ve prepared for that in 2023. Higher interest rates and restrictions on lending by financial institutions are making it difficult for clients to get funding. For example, banks don’t want any changes once plans have been locked in and I’ve noticed that first home buyers are really struggling to get mortgages.

Not only are banks more cautious, but clients are a lot more careful around where their money is being spent. Additionally, I’ve noticed that banks want more work done on fixed price contracts, which is very hard for us. I’ve had to turn down fixed price work, because even though we can put buffers in, on some jobs it’s still too risky for us.

There is some light at the end of the tunnel, though. We are seeing prices start to settle, which has been helped by the supply chain becoming a lot steadier. Hopefully prices will become more locked in. However, any future instability in freight and fuel costs will impact that.

Even if things end up better than expected, we believe in being prepared, so we have planned for a downturn in sales. For us, that means looking ahead
to try and streamline our processes, thinking of ways we can make it easier for clients, and talking to contractors to see if there are any areas where we can work together to keep cost rises to a minimum.

 

Firm: HAMR Home Building

Interviewee: Richard Warwick

Role: Head Builder/Director

Location: Whitianga

Staff: 8

We’re anticipating that a slowdown might happen, but we’re not seeing signs of one just yet. I’d say that we’re preparing for the worst but hoping for the best – and, to be fair, we’re already booked up a year in advance on residential and new builds.

I would say that enquiries have slowed up, but it’s hard to say whether that’s down to the financial environment or the time of the year. We generally see enquiries drop off from Labour Weekend (24 October) to Auckland Anniversary Weekend (late Jan), as people are focused on Christmas.

As we’re in a coastal, holiday town, I find that a lot of people come here for a holiday over the break and get excited about living here, then enquire about building a bach in the new year. Additionally, we don’t have a lot of second home housing stock, so if people want to move here, chances are they’ll need to build a new home. 

While we’re not seeing signs of a slowdown, we are seeing less lavish spending. The budgets for our jobs are definitely getting tighter, as people don’t have the disposable income they used to and they don’t want to borrow money because of high interest rates.

I just hope that prices settle down! I’m confused as to why NZ-made products are going up in cost, as you can’t really blame that on events in Russia or China!