Building on a roll

Statistics New Zealand’s latest quarterly survey shows the strong growth in construction work has been drivenby residential building.

The survey shows total construction work was up 2% reaching $7.214 billion of new building started in the second quarter of the year, up from the previous record of $6.74 billion in the final quarter of last year.

Residential building work was up 4.2% at $4.258 billion and non-residential work was down 1.5%, following a 4.6% rise in the first quarter of this year.

Spending on commercial projects has been easing back for some time.

Home building continues to be encouraged by low interest rates and strong capital gains, says Satish Ranchhod, Westpac senior economist.

“Increases in house building have been widespread with Auckland leading the way but sizeable gains in many other regions.

“It is off the back of low interest rates and the related strong gains in house prices.”

He expects that overall construction activity will remain strong over the year ahead.

That’s being underpinned by a large and growing pipeline of residential projects, with new dwelling consent numbers running at record highs.

The outlook for non-residential construction is mixed across segments, says Ranchhod with strength in the industrial and “big box” retailing segments and a large number of infrastructure projects planned.

However, the outlook for office and strip retailing is softer.

“While the pipeline of construction projects is strong, the pace of activity may be constrained by difficulties sourcing labour, as well as shortages of some building supplies and rising prices.”

Statistics New Zealand estimates the average delays to commercial building projects caused by level four lockdowns is about 30 working days (33 for residential), or six to seven weeks.

Some projects may now be facing delays as long as eight months.