Thursday, 7 February 2013

Mainzeal is a symptom of a larger problem

When a large builder like Mainzeal falls over it causes a bigger splash than all the other smaller builders that have quietly retired, gone under, or moved their assets to Queensland—but the causes of their collapse is the same.

Questioners have been asking this morning how it could  happen just when rebuilding in Christchurch is just about to start?  How it could happen when Auckland has a serious housing affordability problem, and a  severe shortage of starter homes.

Let me venture a guess.

This is partly due to some poor management, as Brian Gaynor and others have hinted at, but it’s also a symptom of the facts contained in both questions.

How could it happen just when rebuilding in Christchurch is just about to start? Because, for two years, rebuilding in Christchurch has not been allowed to start—by order of the government. Another great example of the failure of central planning preferred by this government.

And how could it happen when Auckland has a serious housing affordability problem, and a severe shortage of starter homes? Simple. It’s happened because there is a serious shortage of starter homes being allowed to start—a great example of the collapse of the model for speculative housing* about which this government has done nothing but talk.

In other words, Mainzeal’s collapse illustrates the problems facing every builder in the country.

Add to that the fact that Mainzeal, like almost every other builder in the country, has taken the rap for leaky home problems caused by others, and it’s frankly no wonder at all that it’s gone down.

It’s caused a bigger splash, but every builder, developer and property investor faces the same problem.

I suggest you direct your anger at the appropriate suspects.

* What is speculative house building? It’s when Joe Builder buys a site, builds a house on it, and sells it to Mr and Mrs New-Home-Owner for more than he’s shelled out—giving him a small profit which he can use to build his next one. This is how “spec” houses have been built since Adam was a lad. Now however the cost to build a house outstrips even the cost people are prepared to pay for it. Meaning the model for spec building—the engine of affordable housing—is broken. And things won’t be fixed affordably until this model is repaired: As a simple measure of when affordable housing will be built again, it will be when the model for speculative house building returns.


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