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Tender market reflects doldrums in main centres

The tender market in Auckland is fiercely competitive, Rider Levett Bucknall’s Auckland director Richard Anderson says.

“Aided by a high New Zealand dollar, there is little upward pressure on costs, with the restrained work supply margins remaining extremely low. 

"There have been no increases on tender pricing during 2012 and no impacts on costs stemming from the Canterbury earthquake rebuild which is yet to gain any momentum,” he says.

Mr Anderson expects the conditions to prevail for the balance of 2012, pending economic improvement next year.

According to the RLB Report, tight housing supply is generating some signs of renewed activity in Auckland.

But no rise in the RLB Tender Price Index (overall tender costs) for the city is forecast for 2012, despite underlying labour and material costs continuing to rise and a 3% growth forecast for 2013.

Non-residential building activity remains subdued, with consent values down 10% over the past year.

“Given the fall in building consent values overall, building activity in the medium term will continue to be low.

“With reducing public spend and the difficulties in private sector investment conditions, there is a real lack of significant projects on the horizon in Auckland and little suggests any real improvement in the short- to mid-term,” Mr Anderson says.

Growth of 4.7% predicted

In Christchurch, Rider Levett Bucknall predicts a 4.7% growth in tender prices for 2012 and 5% for 2013.

“While there is progress in the residential repair programme, full rebuilds are still moving along slowly. Certain trades continue to show tender price increases although the industry is still awaiting the reconstruction to gather the fully expected momentum,” RLB Christchurch director Neil O’Donnell says.

A number of projects that had been in design stages have been halted as a result of the Central Christchurch Development Blueprint indicating that land will be required for Blueprint Anchor projects. Other CBD commercial projects are proceeding. 

There has been an increase in the number and value of commercial building consents being approved in recent months. Since late June 2012, more than $110 million of commercial building consents have been approved by Christchurch City Council.

“It is expected that this gradual increase in building consent applications will continue over the coming months as the insurance agreements continue and confidence grows." 

In Wellington, despite favourable conditions for buyers, activity remains subdued. RLB is forecasting a 1.5% growth in tender costs for 2012, and 5% growth for 2013.

The local market conditions remain largely unchanged from the previous two quarters. The residential and non-residential sectors continue to operate at historic lows.

Seismic strengthening and leaky home issues are still at the forefront of discussion in the Wellington market. 

Non-residential construction remains “very low” in the Wellington region due in part to a reduction in government spending. A number of new multi-unit apartment blocks have started or have been confirmed to start recently, which reflects the reduced availability of housing stock on offer. 

“The outlook for the Wellington region is one of slow decline. With few signs of improvement, the bottom of the trough still seems some way off. 

Further reductions in workforce numbers are being applied to government departments, both central and local, and are likely to feed through to the commercial, residential and retail markets in the near future.”

More by Chris Hutching for NBR NZ Property Investor