Earthquake puts more pressure on construction industry

Can the construction industry handle any more demand?
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Can the construction industry handle any more demand?

An already stretched construction sector should be able to accommodate repair and rebuild requirements arising from the latest Christchurch earthquake – but homeowners  can expect the cost of building to rise.

The extent of the damage caused by the 7.5 magnitude earthquake, which hit overnight on Sunday night, is not yet fully clear.

But ASB chief economist Nick Tuffley said it should be expected that repair work would be prioritised over normal construction work in many cases. "It may mean that some gets deferred depending on where it is and the resources available in those areas."

Earthquake damage would boost construction demand over the coming year, at a time when construction capacity was already stretched.

READ MORE: Live: 7.5 New Zealand quake causes casualties, tsunamis, and destruction

He said, within Christchurch, the rebuild from the 2010 and 2011 earthquakes was winding down and that could free tradespeople up to work on new damage further north.

But in Wellington, the construction sector was already under pressure when it came to residential work. "It's likely to contribute to a bit more construction cost inflation."

Economist Shamubeel Eaqub said the construction sector should be able to respond, provided it was allowed the flexibility to hire new workers from overseas if necessary.

But he said the earthquakes highlighted the fact that there were still a number of vulnerable buildings around the country that needed strengthening.

In May 2016, the Building (Earthquake-prone buildings) Amendment Act set out a timeline by which most buildings must be checked for structural integrity and brought up to at least 34 per cent  of the building code, if they do not meet the standard.  

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Christchurch, Wellington, Blenheim, Palmerston North, and Gisborne were identified as high-risk areas where priority buildings, such as emergency services buildings and schools, must be strengthened to standard within seven-and-a-half years, and most other commercial buildings are expected to be strengthened within 15 years.

Eaqub said there needed to be a wider conversation about whose responsibility it was to improve those buildings.

He said there needed to be more money in the Government's disaster fund to cover such events. The Earthquake Commission's National Disaster Fund has struggled for a number of years with a lean balance. Its financial statements this year show a closing balance of  $456,589 in the red.

But Gareth Kiernan, of Infometrics, said the Government maintaining a sensible fiscal position was a good approach to disaster management.

"I think the Government is in a pretty good position at the moment, a remarkably good position given the global financial crisis and the massive cost of the 2011 Canterbury earthquakes, and is well-placed to respond financially where required to repair infrastructure."

 

 - Stuff

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