Buoyant look to building sector

Last updated 05:00 04/02/2013

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Optimism has improved significantly in the building sector in the past six months, but the infrastructure industry is feeling a lot more cautious, a new survey shows.

Professional services consultancy Aecom asked more than 200 New Zealand decision-makers in the sectors about their expectations for the next year.

The survey found a strong lift in optimism among those on the investment side of the building sector: Just on half expected greater investment in the coming months, up from 14 per cent last May.

However, developers and consultants - those at the delivery end of the industry - were more guarded.

The number of respondents expecting more work jumped to 53 per cent, from 39 per cent six months ago.

Aecom NZ's managing director, Dean Kimpton, said the fact investors were more optimistic showed they could see the opportunities, but their projects had not yet reached the point where they were being designed and built.

Sentiment on the delivery and investment sides was coming into line "and that means both have got a better understanding of the market".

In the infrastructure sector, feelings were mixed. Forty-two per cent at the delivery end had experienced declining workloads while 39 per cent had won more work.

However, those who expected an improvement in infrastructure spending rose from 35 to 42 per cent.

Chris Olsen, chief executive of Roading New Zealand, said that like the building sector, the infrastructure sector had significantly downsized in recent years. The Christchurch rebuild had helped stabilise work levels, but "things aren't so good in the regions", he said.

This was because the roads of national significance programme and Christchurch's needs had diverted funds away from the provinces.

However, hopes had risen on the news just before Christmas that the Government was raising fuel taxes to pay for more projects.

Telecommunications was expected by the majority of survey respondents to be the dominant sector in the infrastructure industry this year as the Government's broadband rollout gathers pace.

However, 35 per cent of respondents believed roading should be the No 1 priority.

Kimpton said that reflected a difference between where people expected money to be spent "and where it should be spent".

Generally, he said there seemed to be less nervousness about the risks of investing in New Zealand. Nearly half of respondents rated New Zealand an attractive place for foreign investment but only a third said they thought there was an openness towards it.

With mechanisms such as public-private partnerships becoming more common, Kimpton said it was an issue New Zealand needed to deal with.

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Aecom's views were backed by a note from research house UBS which raised its economic growth forecast for the year, based partly on the outlook for infrastructure.

"All signs are that the Canterbury rebuild continues to ramp up, particularly for residential but also infrastructure and commercial (even without the ‘big' projects)."

UBS expects real economic growth of 3 per cent, 0.5 per cent above market expectations.

- BusinessDay.co.nz

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