The New Zealand building and construction industry is facing a challenging period, with a recent report indicating a significant downturn and a slow recovery in sight. This industry, once a key driver of economic growth, is now struggling to maintain its previous momentum. The sector's pattern of boom-bust-boom may have finally exhausted itself, leaving a trail of liquidated businesses and a shrinking workforce.
One of the primary factors contributing to this decline is the housing market. When houses remain on the market for extended periods, and prices weaken, builders and construction firms often retreat from this sector, seeking opportunities in other areas. This shift in focus can be detrimental to the industry's overall health, as it may lead to a shortage of skilled workers and a reduced pipeline of projects.
The latest data from Stats NZ reveals a concerning trend. While the number of households has been steadily increasing, the growth in the number of private dwellings has stagnated. This disparity highlights the industry's struggle to keep up with the rising demand for housing.
The situation is further complicated by the ongoing political uncertainty. The upcoming election, rising interest rates, and weak business and consumer confidence have created a challenging environment for the industry. As a result, many construction firms are facing financial difficulties, with a significant number of liquidations occurring in 2024 and 2025. The credit agency Centrix's managing director, Keith McLaughlin, predicts that this trend will continue, with a plateau in the number of businesses going into arrears.
The construction sector's labor market has also experienced a rollercoaster ride. Construction hiring surged in 2024, only to decline sharply in the following year. This volatility has led to a brain drain, with many skilled workers leaving for Australia in search of better opportunities. However, a recent turnaround in construction jobs offers a glimmer of hope, with a 35% increase in the number of jobs on offer in the 12 months ended March 2026.
Despite these challenges, the industry is not without its optimists. QV quantity surveyor Martin Bisset acknowledges the sector's struggles but remains hopeful. He believes that the industry's short pipeline of work is a temporary issue and that a solid long-term commitment to infrastructure projects is the key to recovery. Certified Builders' chief executive, Malcolm Fleming, shares a similar sentiment, emphasizing the need for bipartisan agreement on infrastructure projects to prevent further job losses.
The cost of materials and rising fuel costs have also become significant concerns for the industry. Fletcher Building, a distribution and retail business, has reported improved volumes in its core manufacturing and distribution divisions, but it also warns of delays and cancellations of new projects due to macro uncertainty and cost inflation. This trend is expected to impact the company's performance in the first half of FY27.
In conclusion, the New Zealand building and construction industry is at a critical juncture. While there are signs of improvement, the sector's recovery remains uncertain. The industry must navigate political uncertainty, labor market volatility, and rising costs to emerge from this downturn. As the industry continues to grapple with these challenges, it is essential to foster a supportive environment that encourages investment and innovation, ensuring a brighter future for the construction sector.
