Canterbury Earthquake Response
Strategic Information for Businesses, 2015
Canterbury earthquake response – key questions
1. How big is the rebuild expected to be? • $35 bn in 2012 dollars (15% of annual national GDP)
2. How long do we expect activity to continue?
• Peak in 2015/16, long tail for non-residential activity
3. What is the profile for activity? • Construction has increased, further increases expected over the coming year
• Construction to remain elevated through to 2017
• Shift towards higher value residential construction, increases in non-residential spending
4. What are some of the key challenges? • Costs of construction• Availability of labour• Prices and rents• Duration of demand
How big is the rebuild expected to be?
• Westpac estimate: $35 bn (2012 dollars, i.e. excluding cost increases)
• Lower estimate than government
• Cost increases will make some planned spending uneconomic, especially in the commercial sphere
• Spending will still occur, but at a later date (BAU vs. rebuild)
• Around half of spend is residential, half non-residential (breakdown over page).
Reconstruction profile
Westpac forecasts
How big is the rebuild expected to be?$bn
(2012 dollars)
Estimated spend to date
(% complete)
Comment
Residential Land
Westpac’s assumption
$5 Assumed $1 to $3 bil
(20 to 60%)
• As of January EQC had completed around 77% of land settlements.
Some of this will relate to cash settlements.
Repairs (properties with damage
less than $100k)
Source: EQC/Fletchers
$2.5 $2.2
+ Privately funded repairs
(95%)
• Around 69,000 properties in the repair program.
• As of 23 January, Fletchers EQR had completed 64,802 repairs.
• Completion targeted in early 2015.
Rebuilds/major repairs
(damage over $100k, funded
privately or through insurance)
Source: ICNZ and Westpac
estimates
$7 to $10 Insurers: $1.1 bil
+ Private: Around $1 bil
(10 to 20%)
• Around 24,000 properties, many are likely to be rebuilt to higher than
pre-quake standard. There will also be a number of new builds.
• As of 1 Jan 15: 2,890 homes fully rebuilt by insurers, work on
another 1,744 homes was underway and 5,700 in pre-construction.
TOTAL RESIDENTIAL $14.5 to $17.5 $5 to 7 bil
Non-residential Public and infrastructure
SCIRT (Horizontal)
Source: CERA/SCIRT
>$2.5 Around $1.6 bil
(65%)
• At the 12 February 2015 around 65% of the total SCRIT program
was complete
• Targeted completion at end of 2016.
Other including councils
and community assets
Source: CERA/CCDU
$7.5 to $8.5 $0.9 to 1.1 bil
(~13%)
• Design and construction has begun on a number of projects.
• Spending to remain elevated over 2015/16.
Commercial
Westpac’s assumption based on
insurance payouts
Around $7.5 to
$10
$1.3 to 2 bil
(around 20%)
• Includes replacement of damaged assets, and significant betterment,
excludes costs acceleration
• $8 bil in commercial claims paid (current dollars)
TOTAL NON-RESIDENTIAL $17.5 to $21 $4 to 5 bil
TOTALAround $35
$9 to 12 bil
(around 30%)
How long do we expect activity to continue?
• Total rebuild spending projected to peak over 2015/2016, 80% completion around 2018.
• Residential construction has been increasing strongly • Peak projected over 2015/16, 80% completion by end of 2017• Completion around 2020
• SCIRT (horizontal infrastructure) peak spend of around $40 mil month, completion in 2016 targeted,
• Public/social asset spending ramping up now, planned spending to remain at high level through 2015 and 2016 before tapering off through to 2020
• Commercial spending ramping up more gradually, projected peak over 2016/2017, long tail
Profile of activity - Residential
• Work to date has predominantly related to EQC’s repair program. The vast majority of spending in this program will be complete in early-2015.
• Residential construction is shifting towards full-rebuilds/overcap repairs (around 24,000 homes), plus some new builds
• Current consent issuance consistent with around 7000 new homes a year (around 21,000 new homes between 2015 and 2017)
• Questions around strength of activity further ahead, and how many new builds/medium-density projects will be required
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Source: Statistics NZ, Westpac
Sept 2010
Residential consents (annual totals)
Profile of activity – Infrastructure and public
• Spending to rise over 2015, remaining elevated though 2016, tail out to ~2020.
• CERA - $1.1 to 1.2 bn (e.g. Metro sports, stadium, convention centre)
• Councils - around $1.1 to 1.2 bn (e.g. art gallery, library)
• Education (Ministry of Education and tertiary providers) - $2.1 to 2.4 bn
• Lyttelton Port - around $1 bn
• Also health, justice, roading
Public sector construction profile (Source: CERA, MBIE)
Profile of activity - Commercial
• Around $800 mil of work was consented in 2014 (roughly double the pre-quake level), with a significant increase expected over the coming year
• Extended period of strong activity
• Betterment of assets occurring
• Questions around timing of spending vs cost (economics of investment decisions)
• Rents• Building size• Cost increases
• When will spending occur? Is it rebuild or BAU?
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Source: Statistics NZ, Westpac
Sept 2010
Non-residential consents (annual totals)
Labour market
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CanterburyAucklandNZ
Source: Statistics NZ, Westpac
Sept 2010
• Unemployment in Canterbury is 3.5%, not far from pre-recession levels
• Net immigration an important source of labour
• Increases in construction and economic activity more generally will absorb spare capacity
• Increasing construction activity in other regions, especially Auckland, will result in increased competition for resources
• Between Dec 2011 and Dec 2014 base rates for construction labour rose 10% in Canterbury vs. 6% in the rest of NZ
Unemployment by region
Residential building costs
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$/sq mtr$/sq mtrCanterbury
Auckland
NZ
Source: Statistics NZ, Westpac
Sept 2010
Ave. build cost in Canterbury: June 2011: $1307 sq mtrDec 2014: $1753 sq mtr (up 34%)
Non-residential building costs
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$/sq mtr$/sq mtrCanterbury
AucklandNZ
Source: Statistics NZ, Westpac
Sept 2010
House prices and rents in Christchurch (s.a.)
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House prices
Rents
Sept 20102012 2013 2014
House prices 11.8 7.1 3.7
Rents 16.4 8.9 1.7
Source: Statistics NZ, MBIE, Westpac
Year to Dec % change
Population growth and housing demand
• Most of the damaged housing stock forecast to be repaired or replaced by end of 2017.
• Rebuild estimates also include new builds.
• Stats NZ projections imply growth in Canterbury’s population of around 53,100 people between 2018 to 2028 (range of estimates: 13,400 to 92,800)
• Medium estimate implies the need for about 23,000 homes over 10 years (around 2,300 per year).
• Comparison• Current: around 7000 new homes consented over the past year• Pre-quake: around 2500 to 4500 new homes built per annum.
So, now what?
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