The annual national construction pipeline report acknowledges an optimism bias in forecasting, then doesn’t seem to take it into account.
In an election year, in particular, optimism about funding is a critical factor for all construction, but the Reserve Bank has had some success in dampening housing expectations and Australia’s Big 4 banks have been clawing money back to meet regulatory expectations of bank funding strength.
International expectations are anybody’s guess, depending largely on the reactions & impulses of one man, US President Donald Trump.
And a highly important factor in New Zealand construction – the level of immigration – depends on who wins the election. A government led by Labour is likely to see cuts, and a lift in Australia’s mining sector will result in a migration swing back to that country.
Those economic factors don’t filter through to the pipeline report, resulting in an even greater optimism bias this year than in the 4 previous reports.
The report, commissioned by the Ministry of Business, Innovation & Employment, is based on building & construction forecasting by BRANZ, and Pacifecon NZ Ltd data on known non-residential building & infrastructure intentions. It has a 6-year horizon.
Despite the absence of critical factors, the report does contain findings. These are its main 6:
- The national forecast shows a higher peak with a longer duration than previously forecast
- Dwelling unit consents are forecast to reach a new peak for the next 5 years (34,500)
- Growth in non-residential buildings is forecast to continue for longer and to a higher level than previously forecast
- Growth in building & construction in Auckland is expected to be sustained for a longer time than in other regions
- Dwelling consents in the rest of New Zealand grew 27% in 2016, and
- House sizes have plateaued & decreased in some regions in the last decade.
27 July 2016: $200 billion construction pipeline forecast for next 6 years
Attribution: Pipeline report & release.