Search for Stability Prompts NZ Home Builder’s Aussie Expansion

A story of missed opportunity is unfolding for builders in the greenfield sector as the cost of constructing or purchasing a home reaches tipping point. The fallout from Covid—and the policy decisions that followed—had a devastating impact on builders and developers in this space, and the echoes contine to be felt. According to ASIC, the construction industry accounted for 28 per cent of all insolvencies in the year after the pandemic, including major players and household names. Yet, had Australia taken a different approach to the HomeBuilder grant, interest rate moves and contract structures, the outcome might have mirrored that of New Zealand. Builders across the Tasman initially had a smoother time of it, and now one of NZ’s largest players is making a move into Australia. Stonewood Homes, with more than 8000 homes to its name, is putting out feelers in the franchisee market as it looks to scale up its operations. Providing impetus are falling prices in NZ, where home values are down between 6.8 per cent in Christchurch and 24.9 per cent in Wellington from the post-Covid peak, according to CoreLogic. ▲ Stonewood Homes is the third-largest builder in New Zealand in 2016. This Whangarei home won it a house of the year award in 2021. Stonewood Queensland manager Mandy Stephens says there is a lot of learnings to be taken from both sides of the ditch in the post-Covid market. “Being locked into those low-cost, high-volume fixed-price contracts was fairly catastrophic,” Stephens says of the pandemic and post-pandemic periods. “There is still a really great market in Queensland but we have to enter it with caution and we have to enter it with a sensible pricing structure and growth plan so that we don’t get into that same position. “During Covid, we didn’t have those same issues on that same scale in New Zealand. “It impacted people buying off plans for apartment blocks because they tended to be fixed price but it didn’t impact residential construction in the same way.” This is because New Zealand appeared to have its fair of builder collapses many years earlier, including Harner Construction and Mainzeal Construction. Stonewood began in 1987 in Christchurch and expanded to the North Island in 1996 By 2016 it was the third-largest builder in the country. But that same year the builder had its own “bump in the road” when the Stonewood Christchurch franchisee collapsed. This led to Chow Group and Inno Capital acquiring the master franchise in March of 2016 to complete homes and continue its position in the Kiwi market. ▲ The New Zealand housing market is turning into positive territory with falling mortgage rates expected to boost prices this year. Now, Stephens says, in New Zealand while builders have not collapsed this time around, the economy has declined significantly more than Australia’s and jobs have become more precarious. “The cost of living remains high, it’s still more expensive to build and own a home in the majority of New Zealand than it is in Queensland,” Stephens says. “I absolutely think if the New Zealand economy remains dormant for much longer there will potentially be other builders or businesses looking for a more vibrant economy.” Stephens says that pre-Covid, Stonewood’s expansion in New Zealand was almost exhausted after 35 years in business, so the natural progression for growth was their near neighbour. “We already had strong links but also there are quite a lot of Kiwis already living in Queensland. So we had that instant brand recognition and proximity to New Zealand,” Stephens says. “I mean, it’s closer to New Zealand than other parts of Australia are to Queensland, really.” The Stonewood Homes manager says the search for new builds is growing because existing real estate keeps increasing in price. “For us, it’s a case of coming into a more stable market but also learning from those ... rapid growth cycles that occurred,” Stephens says. “So we will transition to a point again where it’s cheaper to build and I think we’re probably at that tipping point at the moment.” Stephens says there is a real lack of confidence for Australian buyers and smaller builders who got burnt during Covid. “I think people are more nervous now of corporate builders than they used to be,” Stephens says. “If one corporate goes down, it’s significant, as we saw with Porter Davis, it takes down a lot of people. “Whereas, with a franchise network model, you have the larger brand backing, but you also have the local builder relationship. “So you’re talking to the person who’s going to really be responsible for building your home. “And I think that local relationship and trust building is going to be quite significant to rebuilding confidence.” Stonewood Homes is launching in Australia, starting in Toowoomba, this month and on the Sunshine Coast in March. As the Australian greenfield market recalibrates, smaller builders certainly have big boots to fill and lessons to learn. You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

Search for Stability Prompts NZ Home Builder’s Aussie Expansion

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