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Environment / Climate change

Chart: The Christchurch earthquake has led to a construction boom

In February 2011, Christchurch, New Zealand’s second largest city, was struck by an earthquake that hit 6.3 on the Richter scale. It came mere months after an even bigger earthquake, which hit 7.1, in September 2010.

As you can imagine, this wasn’t good news for the city’s buildings or infrastructure. Roads and buildings weakened by the 2010 earthquake were further damaged the next year. Meanwhile liquefaction, a weakening of the ground’s structural integrity, meant fresh damage to homes and public spaces, even long after the quake had concluded.

One side-effect of this reconstruction effort has been a mini-boom in the local economy, as money from insurers and the Earthquake Commission has sparked a growth in the building industry. Here’s a graph of construction employment in New Zealand’s three largest cities since 2000:

Share (%) of construction employment to total employment. Source: CityMetric Intelligence.

Since 2010, Christchurch’s construction employment has seen a very noticeable leap. The demand for construction workers is so great, in fact, that, according to recruitment company Hays, they can be employed within 48 hours of applying to a recruitment agency.

The city’s economy has also recorded a 6.6 per cent GDP growth in the year ending December 2013, thanks to the NZ$40bn cost of the rebuild. Auckland, by contrast, recorded growth of just 2.3 per cent.

The numbers won’t stay this high, of course. Construction employment peaked at around 6.2 per cent in 2012, but it’s already fallen below 6 per cent: once areas are rebuilt, the workers are no longer needed. Add to that a population which shrank by 2 per cent between 2011 and 2013, and it seems unlikely Christchurch will be needing new housing anytime soon.

GDP growth may well slow, too, as the construction industry winds down again. Meanwhile, the Reserve Bank of New Zealand is concerned that the boom could cause inflation, driving up interest rates and the New Zealand dollar.

Construction employment in the other two big cities, however, looks set to increase steadily over the next five or 10 years.  Auckland, with a population of 1.4 million, has a long-term plan to build new homes to house an extra million people in the city by 2040: as a result, its construction sector is expected to grow by 68 per cent by 2019, according to the National Construction Pipeline report. Wellington is predicted to have the second highest rate of growth in its construction sector– 28 per cent by 2017. 
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