More construction is good for a lot of businesses, from developers, designers and furniture companies like Systems Commercial Furniture, developments are always worth keeping an eye out for. New Zealand’s seen a recent inflation in construction, one that’s expected to slow down in the coming years thanks to escalating costs cutting down demand, as stated by an industry report.
The city of Auckland felt the cost inflation the most, seeing an 8% inflation in 2017, which is expected to go down to 6% by 2018’s end, 3.5% by 2019, and 3% in 2021, according to data from Rider Levett Bucknall’s recent Oceania Report of tender prices.
Christchurch, meanwhile, is coming off of the 2015 post-earthquake peak of 6% growth in tender prices, with increases expected to be maintained in 2018, at 3% matching 2017, and is expected to shrink to 2% by 2019. Meanwhile, Wellington tender costs are expected to go up by 6% in 2018, from 2017’s 5.3%, before slowing down to 4% by 2019, and 3% by 2021.
Construction costs across the NZ has been going up at faster rates than the country’s inflation of 1.1%, underpinned by the country’s highest tourism and migration levels in recent years. However, RLB has some bad news for companies in the NZ like Systems Commercial Furniture, as they are expecting that demand will go down in the future, thanks to labour shortages and escalating costs.
RLB’s Oceania Chair, Ewen McDonald, says that across the NZ, escalation forecasts for the year of 2018 remain high, with all regions in the country expecting tender price indices to go up higher than the current consumers price index. McDonald says that, moving forward, it’s expected that the escalation will slow down across the country.
Auckland and Wellington’s escalation is expected to drop by half come 2021, down to 3%, whilst Christchurch’s escalation is expected to remain stable at 2% from 2019 onwards.
The report added that, building cost escalation is continuing to outdo inflation levels by a notable margin. Subcontract resources are being stretched thing across the NZ, and the country is seeing significant increases in pricing in various industries, not due to market inflation, but due to an absence of competitive tension.