Boom in construction to fade over next few years

The $9.2 billion drop in construction will be driven by the reduced strength of the residential market, says the  national construction pipeline for 2022 prepared by the Building Research Association (Branz) and construction research firm Pacifecon.

About 223,000 new dwellings are expected to be consented over the five years to 2027 at an average of just over 37,000 dwellings a year.

Despite the fall from the elevated levels of the past couple of years, an average of 37,000 dwelling consents per year takes residential construction back to 2019 levels.

Multi-unit dwellings accounted for 48% of all dwellings consented last year and the report is forecasting 22,680 multi-unit consents this year, falling to 14,380 by 2027.

New homes are the biggest contributor to national construction at 60% of total building activity last year. The report forecasts residential construction alone with drop from $30.6 billion to a low of $19.6 billion in 2027.

Commercial activity is also not immune from uncertainty in the construction sector, but strong project intentions in the sector remain and the report is forecasting commercial building to remain strong for the next couple of years, peaking next year at $11.1 billion, before falling away to $10.7 billion at the end of the forecast period.

However, infrastructure activity is forecast to increase year on year, peaking at the end of the forecast period at $11.5 billion.

The report says all regions of New Zealand are expected to have declining levels of construction activity, but Auckland, which last year represented about 42% of consents, could see building drop 22% to $15.8 billion over the next five years. Canterbury will follow, with a 21% drop to $5 billion by value.