2. 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
3. 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
4. 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
TOTAL
Around $35
$9 to 12 bil
(around 30%)
5. 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 $40 mil month, completion
in 2016 targeted,
• Public/social asset spending ramping up now, planned spending to remain at high
level through 2015 and 2016 before tapering off through to 2020
• Commercial spending ramping up more gradually, projected peak over 2016/2017,
long tail
6. Profile of activity - Residential
• Work to date has predominantly related
to EQC’s repair program. The vast
majority of spending in this program will
be complete in early-2015.
• Residential construction is shifting
towards full-rebuilds/overcap repairs
(around 24,000 homes), plus some new
builds
• Current consent issuance consistent
with around 7000 new homes a year
(around 21,000 new homes between
2015 and 2017)
• Questions around strength of activity
further ahead, and how many new
builds/medium-density projects will be
required
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
0
500
1000
1500
2000
2500
2000 2003 2006 2009 2012 2015
Number$m
Number (RHS)
Value
Source: Statistics NZ, Westpac
Sept
2010
Residential consents
(annual totals)
7. 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)
8. 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?
0
500
1000
1500
2000
2500
3000
0
200
400
600
800
1000
1200
1400
2000 2003 2006 2009 2012 2015
Number
$m
Floor area (RHS)
Value
Source: Statistics NZ, Westpac
Sept
2010
Non-residential consents
(annual totals)
9. Labour market
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
%%
Canterbury
Auckland
NZ
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
12. House prices and rents in Christchurch (s.a.)
500
1000
1500
2000
2500
3000
500
1000
1500
2000
2500
3000
2000 2003 2006 2009 2012 2015
Index
Index
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
13. 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.
14. So, now what?
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