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Source: MIL-OSI Submissions

Impact of COVID-19 on building projects – Media release

4 September 2020

The completion dates of home building projects in the June 2020 quarter were reported to be delayed by nearly seven weeks on average, Stats NZ said today.

“COVID-19’s impact on project delays was, in most cases, longer than the alert level 4 lockdown, during which all non-essential work had to stop. In some cases, construction projects were delayed for two months or more,” acting building statistics manager Dave Adair said.

Home builders are expecting median delays of 33 working days as a result of COVID-19, following the alert level 4 lockdown that was in place until the last week of April and subsequent worksite restrictions. Non-residential projects, including commercial office buildings, shops, and hotels, are estimated to have completion dates set back by a median of 30 working days.

The median is the mid-point in a range – one half reports shorter delays, the other half reports longer delays.

“These insights reflect the opinions of the quarterly building activity survey respondents who described the impacts of COVID-19 on their projects, whether that be realised or expected,” Mr Adair said.

More than 90 percent of building firms that offered comments in the survey mentioned delays, although the range of comments varied significantly. In most cases, projects were delayed for 20 to 60 working days. The delays were longer in some cases, although factors other than COVID-19 may have been at play. A small group of respondents noted their projects had been put on hold until conditions improved.

The delays experienced were often partly attributed to factors other than the alert level 4 lockdown, although still as a result of COVID-19. These factors included:

  • loss of favourable weather – some projects were further slowed down by wetter winter months, after being extended
  • labour – contractors had in some cases been in high demand, leading to longer wait times for work to be carried out
  • building supplies – decreased stocks of some building products were noted, as well as delays in shipping materials into New Zealand
  • reduced productivity – some loss of productivity due to increased health and safety measures introduced to slow the spread of COVID-19, such as social distancing at work sites.

“Some responses also linked delays to increased costs, although the situation is complex and there were other factors influencing this,” Mr Adair said.

A quarter of survey respondents mentioned financial implications, with most reporting an increase in costs. The most common were higher labour costs, holding costs such as holding inventory and hiring scaffolding, ongoing costs such as mortgage payments and insurance, and material costs. These related to ongoing costs incurred while projects were on standby, as well as those that reflected the impacts felt throughout supply chains.

Around 5 percent of respondents gave an indication of the size of these additional costs. Most projects were likely to have incurred COVID-19-related costs of less than 2 percent of the total project value. Although this is not a conclusive measure of cost implications, it does give an idea of how some projects have been affected financially.

“Respondents also mentioned delays in receiving income, with some unable to rent out or sell their buildings when they had expected to, and others having to find more funds to continue the project,” Mr Adair said.

Around 11 percent of respondents also said it was harder to get the right resources, be that labour, materials, or both. Quite often this lack of resources was linked to project delays. One of the most common themes was that sub-contractors were spread too thin between jobs, and this possibly exacerbated delays, impacted schedules, and added to costs.

Other themes mentioned included:

  • productivity (5 percent)
  • market confidence (less than 3 percent)
  • cancellation – realised or expected (1 percent).

Feedback

For the Value of building work put in place: September 2020 quarter release, Stats NZ hopes to improve on the sentiment-based data it captures.

Stats NZ welcomes your feedback on the current, and possibly future, work on COVID-19’s impact on the construction industry. You are encouraged to comment on:

  • how useful this information is to you
  • how you might use this information
  • any other information you would like included
  • any enhancements that would make these estimates more useful
  • any other suggestions for improvement.

To send your feedback or if you have a technical enquiry, please contact Dave Adair at dave.adair@stats.govt.nz or Adriaan Lotter at adriaan.lotter@stats.govt.nz.

Methodology

Stats NZ asked all June 2020 quarter building activity survey respondents to note any factors that might influence their building projects, including COVID-19 and the lockdown.

A sample of just over 1,000 responses mentioning COVID-19 were included in this analysis. The responses contained information around the realised and/or expected impacts of COVID-19 on 419 residential projects and 604 non-residential projects.

Comments captured in these responses were categorised according to the information included. A response could be included in more than one category.

The insights captured from these responses are intended to reflect common themes present in the sample of comments,  serving as a summary of the opinions of respondents. This approach was used to provide complementary insights into Value of building work put in place: June 2020 quarter.

During the June 2020 quarter, most of April was spent in alert level 4 lockdown, with only essential work permitted. All other construction was allowed to continue from 28 April.

The delay estimates were based on responses from 161 residential projects and 177 non-residential projects.

MIL OSI