Fears more building companies could follow Armstrong Downes into liquidation as cost pressures mount

New Zealand's building industry admits it's facing one of its biggest challenges ever as costs spiral and procurement challenges mount.

It comes after Wellington company Armstrong Downes Commercial went into liquidation, sparking fears more could follow.

"It should be a wake-up call to focus very closely on the bottom line for the next 18 months," said David Kelly of Master Builders.

"What's the cash flow look like? What do the margins look like? Have you got your costs under control?"

Grant Thornton liquidators said two of Armstrong Downes' largest projects were suffering substantial losses as a result of being fixed-price contracts. They said it comes at a time of spiralling costs, procurement challenges and labour shortages - issues the whole industry was grappling with.

"Since the late '80s, we haven't had anything like this in terms of inflation, material shortages - it's unprecedented," Kelly said. "I think it's as big as anything we've faced in quite a long time."

Those problems were expected to impact the cooling residential market too.

"In the medium term, it's going to mean there's much less of an appetite by developers for actually want to build because they're not going to be able to build for the price the market's prepared to pay for a property," housing commentator Ashley Church said.

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