Bottlenecks in the construction sector and slow residential housebuilding growth have forced the Treasury to halve its forecast progress rate on KiwiBuild, according to new reports.
Housing Minister Phil Twyford has slammed the ‘kids at the Treasury’ for the prediction which he claims doesn’t reflect the number of homes actually being built, but New Zealand National Party says the policy ‘won’t contribute half as much to the building of new houses as the Government has spent years claiming.’
Forecasts before Christmas projected approximately $5bn in KiwiBuild investment over the next five years, but current forecasts estimate around $2.5bn for that same period.
Despite this, finance minister Grant Robertson has stated that the Government’s plan to build 100,000 affordable homes within a ten year period has remained unchanged. According to the Treasury’s Budget Fiscal and Economic Update (BEFU), a larger proportion of the construction is set to occur outside the forecast five-year period.
Issues including ongoing skills shortages and government red tape have contributed to the slowdown. The forecast is now making assumptions about how much extra activity the KiwiBuild scheme will induce, and on the impact of government policies such as migrant construction workers coming to New Zealand under the KiwiBuild visa.
“There remains a high degree of uncertainty about the impact that these policies may have,” the Treasury stated. “Growth in real residential investment may be weaker than forecast if capacity constraints are more binding than assumed.”
According to the Treasury, this slowdown could also lead to KiwiBuild substituting for other developments that might have taken place instead.
National says this is partly the result of the Government’s restrictions on foreign investment, which have led to Housing New Zealand having to borrow an extra $2.9bn, along with an immigration policy that makes it more difficult to recruit skilled workers from overseas. REINZ says that KiwiBuild is a ‘fantastic initiative,’ but that the Government will need to cut the red tape in order to make it work.
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First KiwiBuild homes under construction on McLennan site