The New Zealand construction industry is slowly bouncing back after a challenging period marked by economic uncertainty, political shifts, and rising interest rates. As the demand for architectural services has increased by 12% over the past year, the stage is set for a rise in building activity across residential, commercial, and infrastructure projects.
Based on our observations, it appears that many developers and investors adopted a cautious approach in the lead-up to and following the recent elections, resulting in the delay of construction projects. However, with the demand for architects increasing, we’re seeing clear signs that the construction sector is ready to grow again, which could bring expanded opportunities across various roles in the industry.
The Economic Slowdown and Rising Interest Rates
Rising interest rates and inflation have hit New Zealand’s construction sector hard. In 2023, the Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) to 5.5% in an effort to control inflation, resulting in increased borrowing costs for developers, investors, and homebuyers. As a result, many projects were delayed or scaled back, particularly in the residential sector, where house prices fell by nearly 13% in the year ending June 2023.
This economic slowdown has led to a 5% decline in building consents compared to the previous year, as reported by Stats NZ. The uncertainty surrounding the 2023 general election further compounded the slowdown, as developers hesitated to invest in large projects without a clear policy direction.
Why the demand for Architects is showing movement despite the Slowdown
Despite these challenges, there’s been a noticeable increase in demand for architects. This is a strong indicator that confidence in the construction sector is returning. Architects are typically at the front of the project timeline, designing and planning before any physical construction begins. As more architectural firms report a rise in inquiries and contracts, it suggests that developers and investors are starting to push ahead with plans that were previously on hold.
This renewed interest in architectural services points to an impending wave of construction activity, from residential developments to large-scale infrastructure projects. As the economic landscape stabilises, we can expect to see an uptick in construction across various sectors.
What Does This Mean for Other Construction Roles?
The growing demand for architects is a positive sign not just for designers but for the entire construction industry. Here’s how it will create opportunities across multiple roles:
Project Managers: With more architectural designs approved, project managers will be essential in ensuring that projects are executed efficiently, on time, and within the financial constraints imposed by higher borrowing costs.
Construction Workers and Tradespeople: Every architectural project needs skilled labour to bring it to life. From electricians and plumbers to carpenters and masons, demand for tradespeople is set to rise as projects move forward.
Engineers: Both civil and structural engineers will be critical in translating architectural plans into safe, practical, and cost-effective buildings. As architectural demand rises, so will the need for engineering expertise.
Quantity Surveyors: The current economic climate makes cost management more important than ever. Quantity surveyors will play a vital role in keeping construction projects within budget, particularly in light of rising material and labour costs.
For companies in the construction sector, now is the time to start planning for future growth. Despite the current economic challenges, the projected balance of interest rates and government driven construction initiatives offer a more optimistic outlook. With the construction industry set to grow again, the demand for skilled professionals will rise sharply. According to the Construction Industry Training Organisation (CITO), the sector is projected to need 80,000 more workers by 2028 to meet increasing demand.
The Role of Interest Rates in Shaping the Industry’s Future
The potential stabilisation of interest rates could provide much-needed relief for developers and construction firms seeking to finance new projects. The high Official Cash Rate (OCR) has contributed to a slowdown in lending for construction, with residential building consents down by 5% year-on-year as of mid-2023, according to Stats NZ. Nevertheless, the construction sector continues to make a significant contribution to New Zealand’s GDP, accounting for approximately 7% of the economy.
Furthermore
Government initiatives aimed at addressing the housing shortage and improving infrastructure could catalyse a resurgence in construction activity. The National Infrastructure Plan outlines a roadmap for $100 billion in investment over the next 30 years, with a focus on transport, housing, and water infrastructure.
Housing remains a key area of focus. The government has committed to building 10,000 new homes annually under the KiwiBuild program to alleviate housing shortages. Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development also aims to streamline the consent process to accelerate construction timelines, which will further drive demand across architectural and construction roles.
In addition, with the change in government many funded projects were put on hold as re-evaluations have taken place. Particularly the MOE (Ministry of Education) projects previously put on hold will be given the green light along with MOJ (Ministry of Justice) works.
Conclusion
Despite the economic challenges posed by high interest rates and recent uncertainties, the recovering demand for architects indicates positive growth for the construction industry in New Zealand. As the economy stabilises and confidence returns, we can expect to see a rise in construction projects across both residential and commercial sectors.
Plan ahead for success!
At Franklin Smith Recruitment, we are ready to help businesses access the skilled professionals needed to meet this demand, ensuring that the sector can thrive in the years to come.
