24th January 2024
In this newsletter:
Stats NZ: Annual number of homes consented down 24 percent
CoreLogic: Annual construction cost growth softens to 2.4%
NZGBC: A practical guide to upfront carbon reductions
NZ Infrastructure Commission: Analysis of NZ's infrastructure workforce
Infometrics analysis: Why are freight prices suddenly surging?
Stats NZ: Annual number of homes consented down 24 percent
Latest figures released by Stats NZ this month showed that the annual number of new homes consented has continued to decrease from its peak of 51,015 in the year ended May 2022.
There were 38,209 new homes consented in the year ended November 2023, down 24 percent compared with the year ended November 2022. More data on regional breakdowns can be found on the Stats NZ website.
CoreLogic: Annual construction cost growth softens to 2.4%
As pressures on residential construction supply chains and capacity ease, annual growth in construction costs has reduced to the lowest level in around seven years.
CoreLogic’s latest Cordell Construction Cost Index (CCCI) recorded a 0.8% rise in the fourth quarter of 2023. Despite a slight uptick in the pace of growth compared to each of the previous three quarters (0.4%-0.6%), it remained below the long-term average of 1.1%. This brought the annual change to 2.4%, well below the 10-year average of 4.5%. Click here to see the full report.
CCCI is a quarterly industry report that measures the rate of change of construction costs within the residential market to build a ‘standard’ 200 sqm three-bedroom, two-bathroom single storey brick and tile house in Aotearoa.
NZGBC: A practical guide to upfront carbon reductions
NZGBC has published a guide that aims to demystify how projects can identify, reduce and report on the emissions associated with materials and the construction of new buildings. The report includes a comprehensive framework for how to select materials and products to slash a building’s footprint right from the design stage, as well as how to set feasible emissions reductions targets for the project. Click here to see the guide.
NZ Infrastructure Commission: Analysis of NZ's infrastructure workforce
This research provides the first comprehensive baseline analysis of NZ's infrastructure workforce. It looks at how many people work in the sector and what sort of work they’re doing to help identify where NZ will face capacity pressures and how we can respond by sequencing work better and training and recruiting new workers. Click here to read the full report.
Key findings include:
In 2018, the infrastructure workforce included an estimated 108,000 full-time equivalent workers. This is around 4.7% of the overall New Zealand workforce.
Constructing new projects accounts for less than half of the workforce - it is estimated that around 14% of infrastructure workers are engaged in planning and design, 46% are constructing new assets, and a further 40% of infrastructure workers are engaged in asset management and maintenance.
Professional and technical occupations include a higher share of migrants. These occupations are more likely to have university qualifications. Machinery operators and drivers and labourers are less likely to be migrants, and more likely to have moved between industries in recent years.
The infrastructure workforce is ethnically diverse, but women make up a small share of the workforce - only 11% of infrastructure workers are women.
Infometrics analysis: Why are freight prices suddenly surging?
Infometrics Economist Sabrina Swerdloff published an article last week that outlines how the Israel-Gaza conflict is impacting freight prices, and the implications for NZ. Freight prices had been steadily declining since mid-2021 as pandemic-related supply-chain issues dissipated but picked up sharply in January. Although prices are still around a quarter of their 2021 peak, the Drewry World Container Index jumped 27%pa in January and is now 54% above its pre-pandemic (Jan 2019) level. Container freight rate indices measure the cost of transporting goods through shipping containers.
Key points include:
The Houthi movement, a rebel group based in Yemen, began to attack commercial vessels in the Bab-el-Mandeb strait in November 2023, in response to Israel’s actions against Gaza.
Geopolitical tensions are forcing firms to pause shipments through the Red Sea trade route, which includes the vital Suez Canal. The Suez Canal connects trade between Asia and Europe and handles over 10% of global trade.
The Suez Canal is accessed from Asia via the Bab-el-Mandeb strait. Avoiding this strait, and therefore the Suez Canal as well, requires going around Africa’s Cape of Good Hope - this adds around 6,000km and 10 days of travel to the journey, according to Dutch bank ING.
Major economies more directly tied to the Red Sea Crisis, such as the United States and the Eurozone, are concerned that higher shipping costs will eventually be passed onto consumers, reigniting inflationary pressures and potentially keeping interest rates higher for longer.
Higher transport costs would take several months to flow through to consumer items, and weakening global demand may discourage firms from raising prices significantly.
Shipping costs for NZ are likely to feel a more muted affect, as China makes up the largest share of our imports. The Red Sea Crisis still presents a serious challenge to the global economy. Oil prices are now ticking higher, which will flow through into domestic transport costs – between the week ending 29 Dec 2023 and the week ending 12 Jan 2024, the petrol import margin rose 6%.
The inflationary risk of higher shipping costs is mitigated by the fact that only around 40% of our Consumer Price Index is comprised of tradable (overseas-based) inflation.
The scope for trade disruption is still uncertain, with tensions in the region extremely unstable. At this stage, we expect the Reserve Bank will keep an eye on developments in the Red Sea trade route but are unlikely to consider it as an important risk in the next Monitory Policy Review.
