New Zealand's building and construction industry is facing a challenging period, with a notable contraction over the past few years. This downturn, characterized by a boom-bust cycle, raises questions about the industry's future and the broader implications for the country's economy. In this article, we'll delve into the factors contributing to this decline and explore the potential consequences.
The Shrinking Industry
The data paints a clear picture: a significant downturn in the building and construction sector, with no immediate signs of a full recovery. Credit agency Centrix's managing director, Keith McLaughlin, highlights various factors contributing to this decline, including an upcoming election, rising interest rates, and a sluggish housing market. The impact is evident in the numbers, with a notable decrease in the number of building and construction companies in operation.
One of the most striking aspects is the industry's response to the housing market. As McLaughlin points out, builders and construction firms are pulling out of the housing sector due to weaker prices and longer market times. This shift in focus away from residential construction is a significant departure from previous trends.
Uncertain Outlook
The uncertainty surrounding the industry's future is palpable. Martin Bisset, a quantity surveyor at QV, shares insights from the annual quantity surveyors conference, where participants expressed a lack of optimism. Bisset emphasizes the need for a solid, long-term commitment to the national infrastructure strategy, suggesting that New Zealand could benefit from a more consistent approach to infrastructure development.
Malcolm Fleming, the chief executive of Certified Builders, highlights the devastating impact of the lack of certainty on the industry. He argues for bipartisan agreement on infrastructure projects, citing the loss of jobs and skilled workers due to the cancellation of projects after the last election. The loss of businesses and skilled workers has the potential to create a skills gap, impacting the industry's ability to recover.
Construction Hiring and Activity
The labor market in the construction industry has also seen a boom-to-bust cycle. While there was a significant decline in construction jobs in the year ended 2024, a turnaround began in late 2025, with a notable increase in job opportunities. However, the data on job ads and construction activity doesn't align perfectly, suggesting a disconnect between intentions and actual construction work.
The numbers tell a story of declining construction activity, with a notable drop in total construction activity and an even sharper decline in building work. The latest National Construction Pipeline Report indicates a potential recovery by 2030, but this increase is relatively modest compared to 2023 levels.
Rising Costs and Macro Uncertainty
The industry is also grappling with rising costs and macro uncertainty. Fletcher Building, a leading construction products distribution and retail business, notes that while existing projects continue, new projects are facing delays and cancellations, particularly in the commercial sector. Bisset echoes these concerns, highlighting the ongoing issues with material and fuel costs, which are impacting the industry's ability to recover.
Conclusion
The shrinking building and construction industry in New Zealand is a complex issue with far-reaching implications. From the impact on the housing market to the loss of skilled workers and the uncertainty surrounding infrastructure projects, the industry's challenges are multifaceted. As an expert in this field, I believe that addressing these issues requires a comprehensive and collaborative approach, involving government, industry leaders, and skilled workers. Only then can we hope to see a sustainable recovery and a brighter future for New Zealand's construction sector.
