Home builders in overdrive

19:03, Jan 24 2014
Neil Laughton
NEW BUILD: Neil Laughton on a Mike Greer Homes building site.

The city's top two home builders have started the year with bulging order books.

Mike Greer Homes has had its busiest ever January after completing about 550 new homes in Canterbury in 2013.

But 2014 is going to be even bigger, Greer says. "We'll do 750 plus this year."

The rest of the country is pretty quiet apart from Auckland, Hamilton and Bay of Plenty so his company is and will be tapping into quiet areas for builders and tradesmen.

New Zealand is now entering a five-year construction boom, the biggest in 40 years a report - The National Construction Pipeline Report prepared by BRANZ and Pacifecon - predicted in December.

That report picks Canterbury's residential rebuild will peak next year and its commercial later, 2015-17.


"It's either going to peak at the end of this year (residential rebuild) or some time in 2015," Greer agrees.

"I think they are right, it's probably 2015.

"We've got insurance companies flat out trying to cash people out."

But that's only the start of the process of building a home.

"I think insurance companies want people to do it themselves, gets them off their books."

A confidential report provided to the Press, the What's On Report, shows Mike Greer Homes and Stonewood Homes neck and neck for top spot in the 12 months to November last year as the region's top new home builders. The report shows Greer had consented 535 new dwellings in the 12 months to November at a value of $127.5 million.

Stonewood had consented less, 392, but at a slightly higher value of $127.8m. The Stonewood homes are a bit bigger.

In third spot was Golden Homes with 229 dwellings worth $61.9m, then Horncastle Homes at 188 homes worth $41.1m and then Peter Ray Homes at 98 homes worth $37.5m.

The report is based on building consents issued by local authorities.

So far a shortage of tradesmen is not a problem for Greer.

"As long as you make it as easy as possible for the tradies you tend to attract them," he says.

He uses a lot of subcontractors - about 250-300 tradesmen - and employs 45 carpenters, including some from the Philippines, to "derisk" the operation.

The cost of building a new house in Canterbury has soared since the first earthquake in late 2010 and the finger is being pointed at building companies for taking higher profits than they used to because they can.

This week's Statistics New Zealand data shows the price of a newly built house has risen 9.5 per cent in Canterbury in a year.

"Honestly the main problem is land costs. Land costs are just rocketing," Greer says.

Ten years ago he bought sections in Milnes Estate in Halswell for $70,000 and now sections in Aidanfield across the road were fetching $240,000.

He points to Wigram sections, being sold by Ngai Tahu Property, rising nearly 20 per cent over the past year.

The cost of labour and materials in Canterbury was not too different from the rest of the country.

"But the land in Christchurch and Auckland is the killer," he argues.

One of the keys to greater affordability is a lot more land being zoned residential and councils providing the essential water and sewer services pretty quickly.

"That's the problem, not enough zoned land that is serviced."

For example, parts of the Awatea Basin between Halswell and Hornby were zoned residential but did not have services still.

If Christchurch local authorities mass zoned new land residential and provided the services of sewer and water plus intensified housing in the city, land prices would come down, he says.

Greer is building about 50 houses a year in Auckland but sees that as a larger, future market for his company when the pressure eases off in Christchurch. But he doesn't see that happening anytime soon.

He reckons the Canterbury building industry could knock off 7000 new homes this year. That's double what is has done in an average year.

And while he thinks that might reduce to 6000 in the following year that's still a lot.

Stonewood Homes owner Brent Mettrick expects to come close to building 500 homes this year, beating the about 400 last year.

Mettrick says insurance companies were now releasing a lot of work in Christchurch city but these houses are much harder to build than those in the Selwyn and Waimakariri districts where the lion's share of the new house building has been happening.

Christchurch homes, with their land problems, required more preparation - land remediation, geotechnical work, existing use rights versus higher flood plain levels, even before building starts.

"For us the houses will become more complicated but there will still be many of them," Mettrick says.

And he expects to be constructing a few more multi-units this year too. Stonewood's work is less than 40 per cent insurance replacement and the majority is still building new homes for members of the public.

Stonewood put on a bit of a sprint last year, doubling to 100 staff by year's end. It does not employ builders but contracts them.

"I suspect it (2014) will be a consolidating year," Mettrick says.

"I see next year as being still strong."

Mettrick disputes the claims higher house prices are the fault of building companies taking higher profits.

"To me you are only getting better margins because you are actually able to spread your overhead over more homes. On a per house basis I would dispute that entirely and I would say definitely not.

"In fact, I would say the administration and the overhead per house has risen dramatically. So the talk about increased margins within the construction industry I would say is actually wrong.

"Ultimately, yes there is somebody in the industry and a number of people in the industry that are actually doing very well out of it as against how they were doing before, but it is a very big industry and one house has a lot of people working on it."

Peter Ray Homes general manager John Baugh intends to give Master Builders Federation chief executive Warwick Quinn a piece of his mind for comments this week that builders raising prices was one of the reasons for the 9.5 per cent increase in the cost of a new home in Canterbury.

Baugh says Quinn is well off the mark because builders were "locked in" to fixed prices for work for insurers.

"We've all had to reduce our prices and sharpen up our prices in work for insurance companies."

Baugh says the margins for insurance work was less than building an ordinary house. Quinn's comments cast building companies in a bad light.

This year, Mettrick says, Stonewood will be introducing a range of new plans and new offsite construction to help shorten the time it takes to build a home.

"For example, we will be delivering during this year bathrooms that will be delivered onto a slab completely finished and then build the house around it."

Stonewood has set up a joint venture to produce those.

"There is going to be a large crunch coming in the middle of the year when commercial construction really picks up," Mettrick warns.

Quinn is questioning if there are enough tradesmen in Canterbury to boost home building that much further.

He reckons Canterbury probably only has the resources to increase house building to 6000 to 6500 new dwellings in a year.

"Canterbury's issue is what's the capacity down there."

As for the commercial building industry, Anthony Leighs says "2014 Christchurch commercial construction market is going to head into completely new territory, I think."

One of the city's leading commercial builders, Leighs says "We are seeing the start of seriously elevated activity and that is going to put massive pressure on, from a people point of view and from a subcontractor's point of view, and it's certainly going to be very different from experience over recent years."

While the commercial rebuild is only in its infancy, this year will see the start of some big projects such as Burwood Hospital and the Justice Precinct.

He's preparing for labour shortages and expects this year to double the number of Filipino carpenters working for the company and to beef up the number of construction managers by 50 per cent. He's looking for the latter - project managers, site supervisors - in the United Kingdom.

Keeping costs down now that demand was stepping up was going to be the next battle and that was the reason he was looking for resources outside Canterbury.

2014 is shaping up to be a super-sized year for new home building in Canterbury. In the first issue of the Mainland Monitor for 2014 Press business editor MARTA STEEMAN talks to the building industry players about the year ahead.


December 2012 to November 2013

Mike Greer Homes, 535 new dwellings worth $127.5m

Stonewood Homes, 392 worth $127.8m

Golden Homes, 229, worth $61.8m

Horncastle Homes, 188, worth $47.2m

G J Gardner, 99, worth $29.2m

Peter Ray Homes, 98, worth $37.5m

Ryman Healthcare, 95, worth $12.3m

Benchmark Homes, 88 worth $39.4m

Versatile/Totalspan, 67, worth $16.2m

The Press