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“Construction notice: exciting times ahead.”

The property construction industry is New Zealand’s quiet achiever. According to recent research from the Property Council, it contributes more to our national GDP than tourism or agriculture.

It will also provide the platform – the infrastructure, housing and offshore investment – that New Zealand urgently needs to secure its future prosperity.

That’s why, argues KPMG Partner Ian Kowalski, New Zealand must turn its collective focus to supporting this all-important sector.

Some of the hottest topics in the lead-up to the 2017 election campaign involved the property and construction sectors. The first, and most obvious, was housing affordability and supply. The second big issue was New Zealand’s levels of productivity, or lack thereof – which is also hitting hard in the property sector.

Although building activity is currently at gang-buster levels, with high-viz vests seemingly on every corner, there’s a sobering reality behind the boom times. Many in the industry are doing it tough, and that includes the big players.

e’ve had a big awakening in the past six to 12 months,” says Ian Kowalski, an Auckland-based KPMG Partner and property sector expert.

“I think most people would now acknowledge that the existing model needs improvement. There’s widespread recognition of the problems in the industry – and these will need to be addressed if the sector is to keep delivering on our future building needs.” 

 

Time for a new model

The reasons for the lack of productivity are complex and multi-faceted. But underneath it all, says Ian, there’s been a fundamental lack of progress when it comes to how we build. “If you look at the way we were building structures in New Zealand 50 years ago, compared to today, very little has changed. In fact, some statistics would show that what took you 5 days back then, would take you 6 or 7 now.”

What’s needed now, according to KPMG, is for the sector to adopt a different mindset. “Doing what we’ve always done is not going to magically create a step-change in productivity. It’s time to apply disruptive thinking and sow the seeds of innovation across the sector.”

 

A collective strategy

The first step in the journey, believes Ian, is for industry and Government to develop an over-arching sector strategy. This would require Government to “seriously engage with industry” to set targets for increasing productivity, and pathways to achieving it.

“Everybody agrees that we need to encourage innovation, and that the Government has a role in supporting tech start-ups,” says Ian.

“So why not apply that same support to the property sector? It has some of the greatest need, and will deliver a real return on that investment.”     

In a similar vein, industry players would benefit from greater collaboration on areas of mutual benefit – such as innovation, offshore marketing, sustainability trends, and recruitment strategies.

“As a relatively small market that’s geographically distant, it doesn’t make sense for our industry to operate within silos,” says Ian.

“We’re starting to see this collaboration happening already. For instance, KPMG hosted an event recently where we invited representatives from across industry to talk about the issues and share ideas.” 

 

The role of technology

There’s a slow but steady global trend towards embracing new technologies as part of the building process.

“We heard recently about a Chinese company that built a 60-storey apartment block in 18 days,” says Ian.

“They constructed it off-site and moved it on like a lego set.”

Others are already starting to use drones to replace the use of cranes on-site; while the introduction of robotics and AI are also on the horizon.

However Ian says the most immediate need for technology innovation – and those that will deliver the most benefit – revolve around the front-end processes such as building design and project management.

“Realistically, construction will remain a labour-intensive sector in the short to medium term. However we can use technology, right now, to solve problems and reduce cost within our logistics and supply chain. That’s particularly important for New Zealand, as many of our materials are sourced from offshore.”

KPMG New Zealand has developed its own real-world example. The firm’s property team has recently launched a technology-based tool, called the Construction Optimiser, which helps contractors to better manage their cashflow (as well as comply with the new retentions regime).“We’ve seen the difficulties experienced recently by contractors, and this tool was specifically developed to ease those pain points” says Ian.

 

The opportunity     

Despite the current challenges, KPMG believes the future looks bright for the construction sector – particularly if the players are collaborative and match-fit.

“There’s going to be a lot of money spent on infrastructure in the next few years; both by Government, local players, and offshore investors coming in.

“There’s incredible opportunity ahead for the sector – and KPMG is excited about what it can potentially deliver for the country in terms of earnings, opportunities and jobs.”

 

Like to know more? 

To discuss how KPMG could assist your business in the Construction or Property sector, contact Ian Kowalski ikowalski@kpmg.co.nz or for more information on KPMG’s Construction Optimiser tool, contact Geoff Lewis on geofflewis@kpmg.co.nz


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