Construction values eased 1.6%, dragged down by slowing residential sector
In the December quarter, construction values contracted 1.6% in seasonally adjusted terms, taking the total value of activity to $9.3 billion, according to the latest Stats NZ figures.
Residential construction activity dipped 2.6% while non-residential construction volumes edged up 0.4%.
Despite falling from the previous quarter, total construction volumes remained elevated both on last year and pre-pandemic levels, with December quarter work put in place up 6.7% in December 2021, and 11% in December 2019.
The fall in residential construction activity was due in part to lower work put in place in the North Island, with the value of work put in place across the region (except Auckland) slipping $127 million.
In Auckland and Canterbury, residential work put in place increased from the September quarter and rose 22% and 34%, respectively, between December 2021 and 2022.
Non-residential construction was driven by strong activity in Waikato in the December quarter, with $37m more construction work put in place compared to September. Non-residential work put in place in the region was up 73% over the last year.
The December quarter also saw a surge in activity in health, education, and social buildings, with an additional $37m, $17m, and $17m in construction work put in place compared to the previous quarter. Accommodation building was the main contributor to total non-residential activity, despite being down 14% from a year ago.
Infometrics economist Joel Glynn (pictured above) said activity was clearly starting to slow, and that trend was tipped to continue until 2025, but will not drop off a cliff.
“A considerable amount of residential consents remain in the pipeline, which suggests residential construction activity will steadily ease over the next two-three years, rather than drop off a cliff,” Glynn said. “However, we expect cancellation rates will increase as house prices keep falling and interest rates continue to rise, which could result in more substantial declines in residential building activity sooner.
“Upward momentum in non-residential construction appears to be slowing, but activity still increased in the December quarter. The types of building activity being done is shifting away from factory and storage building, as domestic and global supply chain pressures ease, towards publicly funded building activity, such as hospitals and social buildings.”
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