Peak starts in Christchurch?

I spent Saturday in Christchurch visiting family. I haven’t lived in Christchurch since I was six, but in some respects it is still “home”.  People close to me lost a lot.   I get down every few months and have followed progress since the earthquakes with both professional and personal interest.  Among the (not original) observations was the striking contrast between the quick private sector action on the periphery, and the mostly glacial pace of activity in the central city government-controlled zone (where, not coincidentally, owners’ property rights had been quite severely impaired).

Saturday’s Press had an interesting feature on “the growing number of rebuild-related firms going bust despite a building boom in Christchurch” –  presumably not a reflection of lack of work, but of the dislocations and opportunities that major economic shocks bring.  Some will have prospered enormously over the last few years, and others –  a minority – just won’t have coped with the challenges of, say, going out on their own and running their own business.

On this visit, even the government-controlled zone was finally starting to look more like a building site than a bomb site  (and I noticed that the Sunday Star Times had a big article yesterday on the scale of the central city developments).  And it is good to see an increasing number of new buildings up and open.  But I noticed on my previous visit, and again this time, that the new buildings often still have “for lease” signs up, and several vacant floors.  Wandering around the city it was not hard to imagine that Christchurch might already have passed “peak starts”, not just for commercial buildings, but for houses as well. Of course, there is years of work still to go –  and some of the questionable vanity projects (convention centre and sports stadium) are not even near commencement –  but it is difficult to envisage that the level of activity goes higher than it has been over the last year or so.  Four to five years on, presumably everyone has a roof over their head, and fewer firms are operating from very unsatisfactory temporary premises.  Housing market pressures look to be easing, and if the early commercial buildings aren’t quickly filled, what prospect for many more starts in the next five years beyond the projects that are already underway?  At an aggregate level, construction sector activity as a share of production GDP ran up very sharply (and much of that was Christchurch), but it has gone sideways or backwards for the last few quarters.

Once again, the Australian resources investment boom, and its aftermath, spring to mind.  With the difference that, vital as it was, the diversion of resources into repairing Christchurch doesn’t leave us with a new large productive sector at the end of it all.

 

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