Perfect storm: How to beat the building blues

A post-Covid rush on home renovations and new builds has caused prices to skyrocket, frustrating delays and products to run out. Industry sources tell Jane Phare how to beat the building blues.

Fletcher Building’s CEO Ross Taylor doesn’t rate himself particularly highly when it comes to predictions. For example he, like most others in the building industry, predicted tight times after lockdown. Prepare for the worst, keep stocks under control, hunker down, that was the idea.

Well, how wrong Taylor and his colleagues were. Here’s another prediction for what it’s worth, he says. Prices will stay high – and may go higher – for at least another two years.

Get used to the high cost of manufacturing and building because he doesn’t see it easing any time soon. However the good news is that he predicts the timber shortage will sort itself out by the beginning of the warmer months.

This time last year Taylor was preparing for a gloomy outlook. Covid-19 and long lockdowns had turned the world’s economy on its head, closed production factories and disrupted shipping.

“The forecast for what was going to happen with demand and the economy was very dire,” Taylor says.

Fletchers builds around 900 new houses a year but through its building products is involved in up to 30 per cent of housing in New Zealand, both new and renovations.
Inventory in Fletcher Building’s manufacturing plants – insulation, plasterboard, steel products, laminate surfaces, piping, aluminium joinery, roofing and flooring – was slowed as the company prepared to “weather a very difficult storm”.

Structural timber and plywood suppliers in New Zealand were no different. Instead of rebuilding stocks over the winter months as they would normally, ready for the next summer season, they eased back, bracing for leaner times.

But everyone got their predictions wrong, Taylor says. The expected drop in business didn’t happen. Kiwis, confined to their homes during lockdown and working from home, decided to renovate, build decks, pave outdoor areas and add on rooms. At the same time the housing shortage meant builders and developers were frantically building new homes.

Suppliers and tradies alike were overwhelmed, manufacturers couldn’t keep up, imported products were held up in ports, and labour shortages compounded the problem. It was a perfect storm.

“It caught us all on the fly in timber particularly and they’ve never been able to catch up.”

But Taylor predicts construction will slow over the wet winter months, giving timber suppliers a chance to build up stocks.

“I think it will go a long way to solve it. We’ll get into September, October, the next summer season and I think things will have settled down a bit.”

In the meantime builders, architects, joiners, home renovation specialists and house building companies are all vying for the same products, trying to finish jobs on time and on budget. And testy clients want to know why they can’t have the flooring they chose and why the cost of the stone benchtop has gone up.

Those in the industry say there are ways to help ease the pain. The early bird gets the job done, they say, so urging clients to choose products and finishes months earlier than in the pre-Covid era is paramount.

They warn if selection is not done months ahead, builders will go off to another job while they wait for the Italian tiles to arrive and might not return for months.

Be flexible, they say. Choice number one might hold up the job for months so be prepared to quickly change to options two or three, be it flooring or the colour of the steel roofing.

Judi Keith-Brown, president of Te Kāhui Whaihanga/New Zealand Institute of Architects says better and earlier communication between architects, builders, suppliers and clients will go a long way to easing the pain.

“If we pull together it will work.”

She talks regularly to the industry throughout the country, and says the problems are universal – shortages of timber framing, laminated joists, certain colours of steel roofing, kitchen and laundry appliances, carpets and timber flooring, and fabrics for curating and upholstery.

“Freight costs are high and it’s hard to predict when things will arrive.”

She’s heard stories of suppliers having to wear the cost of air freighting delayed products to New Zealand to meet deadlines pushed back by shipping delays.

“They [the suppliers] have promised a delivery date to the clients so they’re having to pay out megabucks to air freight it.”

Amy Hendry, co-director of Four Walls Architecture in Auckland, is another who predicted lean times after lockdown but now her company, like others, is turning work away despite hiring two new architects.

She’s telling her clients to choose finishes, fittings and appliances months before they’ll be needed.

“We don’t know what the lead times are. We tell them ‘you’re going to need this in six to seven months, go shopping, pick what you like, get a deposit down.'”

Builders, too, are being more proactive about making sure clients make up their minds early.

“We’ve got a couple of projects at the moment where the builders are really hounding us and the clients for decisions, and that is way sooner than normal.”

Hendry says developers are particularly conscious of shortages causing construction delays and budget blowouts.

“These are projects where the [timeline] is critical. An eight-week lead time is just not going to fly. Their supply chains are absolutely critical because every week that it goes over is costing them huge money.”

Her company is currently working with a developer on a large inner-city terraced house development who fired a warning shot about specifying materials that could cause a delay.

The developer heard that 240mm floor joists were hard to come by, with a lead time of eight weeks. “Make sure they’re not on the plans, ” he told Hendry.

Taylor says Fletcher Building is running “multiple strategies” to fill demand, including carrying considerably more inventory than they would normally and finding replacements for products that are running low.

Shortages aside, rising prices have alarmed everyone involved in construction. With increased costs in manufacturing, it’s a problem Taylor doesn’t see going away any time soon.

“Power is very dear. If you are manufacturing anything, electricity bills are double, triple what they were last year.”

The cost of base commodities like resin and paper has gone up and the price of steel has risen sharply, he says.

“What China is demanding in iron ore prices has just skyrocketed and that flows through into steel pricing so that’s gone up dramatically.”

It’s a problem faced by building industries in most other markets around the world. The dynamics that are driving people to invest in their houses and governments wanting to keep their economies going by investing in infrastructure are global themes, Taylor says.

The commodities that feed into those industries are becoming scarce and prices have gone up.

“And shipping has gone up dramatically so you’ve got all those things driving pricing quite a bit,” he says.

Those constant, and unpredictable, price rises have been difficult to navigate, Mike Allan, Stonewood Homes franchise manager, says. Clients are advised to confirm products and finishes today because the same price can’t be guaranteed tomorrow.Suppliers have been proactive in letting the company know when products are running low.

“If there is a product shortage then we’ll just take that away from the menu of choice for the client.”

Being organised, locking in a plan and sticking with specifications is important in the current building climate, he says. A client deciding to import different tiles or change a window suddenly was likely to cause delays and add to building costs.

Central Auckland Refresh Renovations franchisee Saleem Bhikoo says planning well and having good relationships with suppliers and tradespeople is the key.

“If you don’t and just rely on squeezing an order or booking through you could be waiting a lot longer.”

Being very clear to clients about how long the renovation will take is also important, he says. Switching to alternative products may not always be the solution. Builders and clients generally prefer products and brands they know and trust. Switching to more niche brands may cause price increases, he says, and using cheaper alternatives can also cause problems with quality and service.

“We’re working on people’s homes where they live and work. We’ve got to be sure we’re delivering a standard of quality that performs and lasts.

“[If using alternative products] ask the supplier where do they source the products from. What is the warranty cover and service period?If the supplier is not busy or the products are not selling well, then why not? We do ask those questions.”

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