Building material delays, prices rises leading to 'catastrophe' for new homes, says Bay of Plenty builder

Master Builders Association national vice president Johnny Calley from Calley Homes says there are huge delays on some materials. Photo / NZME

A coming "catastrophe" and "perfect storm" are how building industry leaders are describing a deepening crisis that could cripple the hopes of new-home buyers and send some companies bust.

Weekly rises in material prices and skyrocketing shipping costs meant new builds were being pushed back.

Fletcher Building confirmed Gib plasterboard, a crucial material for the sector, had some lead-in times of six months for delivery to building sites.

Concerns have also been raised about high inflation, tougher bank lending criteria and new housing becoming more unaffordable.

Bay of Plenty builders spoken to by NZME said products such as plasterboard, fibre cement products, various steel and timber products, and exterior cladding materials - including cedar and brick - were also hard to source.

Master Builders Association national vice president Johnny Calley of Tauranga-based Calley Homes described the situation as "madness".

"I have never seen it like this in my 22 years of building.

Master Builders Association national vice president Johnny Calley of Tauranga-based Calley Homes in 2016. Photo / George Novak

"The scary thing is what they are forecasting around Omicron isolation. When you look to other countries and Australia where 25 per cent of their workforce end up isolating at home we are in for challenging times."

Calley said Gib board used to be delivered on-site in three days but now it could take six months.

That had flow-on effects and he was fearful for smaller building companies.

"The smaller building firms will definitely suffer through this as they don't have the workload to chop and change between sites.

"It is bloody sad to see this unfolding, to be honest."

Calley said he had notified clients that their sites may be put on hold for a period to wait for materials.

The supply chain woes needed to be sorted to get construction moving because otherwise "it's going to be a catastrophe".

Rik Flowerday of Flowerday Homes was also concerned for small firms and renovators.

"It will have a significant impact on smaller building companies and their cashflow. When you can't progress jobs you don't get paid.

"If they can't get product for six months they can't start for six months."

Venture Developments director Mark Fraser-Jones said it was the "perfect storm", with land supply in Tauranga also extremely limited.

Venture Developments director Mark Fraser-Jones in 2016. Photo / Andrew Warner

"We have had a tripling of land prices over the last 10 years and now in the last couple of years we are seeing a 50 per cent increase overall in the cost of construction, ranging not just from material increase but from local body consent fees [set to increase twice this year] and increased Government regulation on build specification.

"Everyone has heard about the six-month wait on Gib orders and there is a multitude of other products that are difficult to procure''.

He said there was already a lengthy wait time for insulation materials and new Government requirements would make it "harder to forward-order as demand outstrips supply".

"All this means is more expensive product, making housing more unaffordable to the average consumer."

In his view, central government was "asleep at the wheel", and the city council's regulations made construction lengthy and difficult.

"I can't see any way for so-called 'affordable housing' to be built in Tauranga in the foreseeable future."

Director of Classic Group Peter Cooney. Photo / NZME

Director of Classic Group Peter Cooney said price rises on materials were coming through weekly and the cost of building was steadily rising.

"We are having to order everything well in advance, earlier than ever before, and delivery dates cannot be guaranteed so we are seeing our build times increase."

Supply chain issues and delivery delays had pushed out completion dates.

"We are seeing hopeful future homeowners face high inflation and much tougher bank lending criteria, making it so much more difficult for them to get funding approval."

The price of structural timber had increased by 25 to 35 per cent in the last 12 months, he said.

Delays, shipping woes and escalating material costs continue to drive up the price of new homes. Photo / NZME

A Fletcher Building spokeswoman said there was more demand for NZ-made products such as Gib, Pink Batts and some steel products.

Production of materials such as Pink Batts was at record levels and some products required a longer lead time for ordering.

Some lead times for Gib were at six months for delivery to site. Delivery to merchants was shorter at four to five months.

"GIB plasterboard is in hot demand, however, Winstone Wallboards has good levels of production in place and is managing supply with our merchants. We have asked customers to extend their lead time for ordering Gib plasterboard and associated products, which has increased the amount of forward ordering.

"Basically, all products are in hot demand, especially key materials used across renovations and new builds."

Bunnings New Zealand director Ben Camire said it was continuing to see strong demand for some building materials as Kiwis carried out new home builds and renovations.

''This is creating a challenge for the entire industry with demand particularly strong for structural timber. While supply chains domestically and globally continue to be disrupted, we're working with our suppliers and trade customers to forecast demand and plan earlier in the build process so we have additional time to manage orders as best as possible.''

Minister for Building and Construction Poto Williams. Photo / NZME

Minister for Building and Construction Poto Williams said Covid and increased global demand had affected international supply chains and this was driving up costs.

The Government had initiatives under way to address the situation, including an inter-agency forum looking at ways to reduce the impact on the supply chain through better information and planning.

The Ministry of Business, Innovation and Employment was updating its guidance on building product substitution to help educate the sector where there were supply chain issues.

The next market study by the Commerce Commission would look at competition in residential building supplies markets, she said.

"We will continue to maintain watch over supply chain constraints and ... to work with the sector to help minimise ongoing disruptions from Covid."

An ANZ spokeswoman said the bank was seeing strong demand from existing and new customers wanting to build.

New builds were also exempt from the Reserve Bank LVR restrictions for owner-occupied properties, and so were an option for many customers with deposits under 20 per cent, she said.

"While not unusual in the building process, cost overruns can be stressful if people haven't allowed for them."

Changes to the Credit Contracts and Consumer Finance Act meant rules around checking affordability, in particular, were very strict and customers should prepare for in-depth questions about their finances.

Kiwibank senior manager Richard McLay said with supply chain constraints on building materials and potential rising costs, the bank encouraged customers to be mindful of clauses included in build contracts.

These included whether rising costs or delays would be passed through to the customer or were fixed and absorbed by the building company.

The Tauranga City Council and the Minister of Health were also contacted for comment.