Total failure of the building industry
Why was this extraordinary lack of performance across an entire industry
allowed to systematically create buildings that were doomed as soon as they were granted
building consent? This has never been fully understood by the residential marketplace or the
construction industry. I say this without reservation due to the repeated flow of knee jerk
reactions by the regulators, industry professionals, suppliers and trades to apply makeshift and
reactive solutions to the problems.
Real estate values
The spiraling real estate market has proven to be unstoppable over the last 70 years.
Inflationary pressures always over-ride any market corrections like we are experiencing now.
Rarely have I seen any meaningful discussion around how new homes, existing homes, cost
of construction, rents and how the ultimate value of the real estate market is linked. They are
not separate issues because the end user is always the same; someone who either wants to
rent a home or buy a home.
... ask any small business in New Zealand how the value of the real estate market affects
their business. If real estate values decrease, then spending stops. As real estate values
climb then so does the discretionary spending like renovations, alterations, purchasing new
cars etc.
Banks
The banks extract so much money from the industry that they have a moral and ethical
responsibility to ensure the homes are fit for purpose. The principle of “buyer beware” should
not isolate the homeowner from all the entities who have benignly or actively contributed to
the problem.
Bank profits have hit record levels in 2024;
BNZ $1,506,000,000 or 1.506 billion
ANZ $2,286,000,000 or 2.286 billion
Westpac $1,105,000,000 or 1.105 billion
ASB $1,364,000,000 or 1.364 billion
Quote from Susan Edmunds for Stuff magazine
“New Zealand banks make more money than global peers…. New Zealand banks
are some of the most profitable in the world, a ratings house says. Fitch ratings has
completed its peer review of the country’s major banks. It found they were delivering
high profits by international standards and that was expected to continue over the
next year or two, despite slowing growth.”
Early housing - batches and low-cost homes that didn’t leak
Rural properties, beach side properties and lower value metropolitan areas often had
batches, cribs or shacks built from used or low-cost materials by owners. These homes were
rarely assessed by council during the construction and an incredible number of these still
exist. Without leaks.
The building industry was able to stretch (downwards in value) and still perform well with
untrained labour. Interestingly many of these homes were clad in flat sheet cladding like the
current products from Hardies. So how were these built successfully (often by homeowners
and their friends) without supervision or checks from council…
Interview of Adrian Orr by Katie Bradford
Orr
…you know this infatuation with the housing market is just too much driven by the media
Bradford
You blame the media for that? NZ seems to have an obsession with house prices ...an
obsession with the OCR and interest rates…?
Orr
...I can’t open a newspaper or go on line or see TV without some reference to house
prices...as soon as we started talking about reducing the official cash rate house prices
came back in. I understand it, I don’t blame the media it’s the structure of the New Zealand
economy …well over two thirds of household wealth is equity in a home….and we see it far
too much as a means of investment rather than just a place to live. So we have one of the
most expensive housing markets in the OECD
Change needed
Leaving the industry to roll on in its current form is never going to turn around the spiralling
construction costs or weight of compliancy needed to operate in the New Zealand
construction industry. Substantial and considered change is required. The benefits need to
be measurable and industry wide. Not tinkering around the edges. Simply debating whether
to roll back regulations or amend existing regulations is not enough. The paradigm of how
the industry operates from conception to delivery needs wholesale change.
How to avoid spending money needlessly
…They had taken the usual steps…researched the issue, called a builder to check it out (he did a
couple of remedial jobs) and the home got a fresh coat of paint. With the leaks still occurring the
owner was considering that some of the walls needed stripping and reclad using a cavity system.
They felt that this was the only remaining option. If I didn’t have the necessary experience to assess
the home accurately, I could have agreed to do the work, taken their money and nobody would have
complained. If you get the issue assessed by an independent person who is ethical and has
experience in leaky homes, they can save you thousands or even hundreds of thousands of dollars of
your hard-earned money.