If you have a friend or family member who is a tradesman or who are currently building a home, you’ve likely heard about their frustration. There is currently a significant shortage of building materials in the world, which is particularly hitting New Zealand hard.
Many people are blaming the shortage on the COVID-19 pandemic. While that is certainly contributing in part, it is not the sole culprit. In fact, part of the shortage is also driven by the rapidly increasing demand of new construction. External issues are also part of the problem. For example, China is currently shifting energy focus away from coal, which has caused production issues for many things including nails, which New Zealand primarily imports from China.
Furthermore, New Zealand’s own exporting is amplifying the problem. One of our largest exports is timber with the forestry industry worth over $4 billion per year. Harvested timber has grown to 32 million cubic meters per year. Unfortunately, New Zealand builders are now very much in need of this resource. There are also internal issues as much of the steel is being used up for infrastructure projects like Auckland’s City Rail Link.
The supply chain has wreaked havoc across the globe. But one of the biggest impacts in New Zealand appears to be in the construction industry, which has an extreme reliance on imports from Australia and other nations. Major producers are prioritizing large economies, meaning many cargo ships no longer stop in New Zealand. The existing supply is often taken by large builders, leaving smaller companies lacking.
How Will This Affect Me?
For the consumer, the obvious question that pops up is how the materials shortage will affect them. The reality is there are a number of impacts that may be felt. For anyone currently building a home, they are likely going to be hit with delays. In extreme cases, it is estimated that homes may not be finished until 2023.
For those thinking about building a home, there are two major concerns. The first lies in cost. The materials shortage has brought with it significant inflation with prices rising as much as 20% for many materials. In fact, the rapid rate of increases for contractors is leading many to abandon fixed pricing. For the consumer, the absence of a fixed price means it could be more difficult to obtain a mortgage.
When Will the Shortage End?
In many ways, this question is akin to looking into a crystal ball. The situation is complex, and there is not a guaranteed answer. Most experts note that the shortage is not a short-term problem and will likely continue through much of 2022.
Many people are asking the government to make more effort in attempting to address the issue. In fact, the industry has held many meetings with ministers regarding both the materials shortage as well as a shortage of workers. While the end to this problem will come, there is no timetable.
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