Several indicators show that the unprecedented post-Covid demand for residential building, which saw record numbers of building consents issued, is alleviating and significantly reducing the demand on the sector.
So says an assessment of the latest national building and construction activity projection published by MBIE in its National Construction Pipeline Report.
Providing projections for the construction industry through to December 2028, the report suggests a positive path ahead. Michael Warren, Manager System Strategy and Performance at MBIE, made the above statement and comments further on the report's release.
"There are strong non-residential and infrastructure pipelines of work including works supporting education, health, fresh water, transport, and subdivisions creating space for future residential and non-residential building activity,” he said.
“Residential building activity is forecast to return to levels that align with the sector’s capacity to deliver buildings ready for occupation, settling the sector into a more sustainable level where supply and demand is much closer than it has been in recent years.
“The overall activity forecast is positive, short-term reductions across various measures in the report suggest activity fluctuations in the sector are being less affected by COVID-19 and returning to a more usual pattern."
The National Construction Pipeline Report is based on building and construction forecasting by the Building Research Association of New Zealand (BRANZ), and data from building economics consultancy Pacifecon (NZ) Ltd. It includes national and regional breakdowns of actual and forecast residential building, non-residential building and infrastructure activity. Aside from looking at residential and non-residential building work, the National Construction Pipeline Report also includes infrastructure intentions. This is the 11th annual edition.
According to MBIE, the aim of the report is to outline a clear pipeline of building and construction work to support:
- planning by all participants in the sector
- scheduling the investment in skills development and capital equipment, and
- coordinating construction procurement (particularly central and local government), which can lead to better scheduling of construction projects.
The four key findings in the report this year are:
Construction activity returns to 2020 levels
Overall activity in the sector is forecast to experience a short-term decrease, returning to levels similar to 2020, and remain steady at that level before increasing from 2028.
New dwelling consents returning to more sustainable levels
The number of building consents issued in the last year suggest we have passed the unprecedented post-covid demand and are realigning with more usual levels of fluctuations.
Strong pipeline of work
The forecast value of non-residential building work remains steady over the reporting period, this is supported by recent increases and a projected value peak in 2023.
Strong infrastructure pipeline
Recovery from the extreme weather events in early 2023 and works to increase resilience throughout the country are key drivers in a projected increase in infrastructure works. The value of infrastructure work is expected to reach a new high in 2026 and remain steady from that point onward.
“The aim of the report is to provide awareness of the expected pipeline of work to support the sector’s strategic planning, investment in skills and equipment and coordination of construction procurement to meet the sector’s future needs. Having foresight into these areas could help mitigate uncertainty and allow for better preparedness across the sector," says Warren.
Residential
The report forecasts a reduction in residential building activity to a more sustainable level of demand that aligns with the sector's capacity to deliver buildings ready for occupation.
It says over 200,000 homes are forecast to be consented over the next six years, almost half of which are expected to be multi-unit dwellings.
Non-residential
The report forecasts the value of non-residential building activity to reach a modest high in 2024 and remain steady and consistent throughout the remainder of the forecast period.
Commercial, education and health building activities make up three quarters of non-residential projects expected to start in the next year.
Infrastructure
The report forecasts the value of infrastructure building activity to steadily increase to a new high in 2026 and remain steady at that new level, largely driven by the extreme weather rebuild and increasing resilience throughout the country.
Nearly all infrastructure projects expected to start next year are transport, water and subdivision activities.
Key points by location:
Auckland
Almost half of the building consents in the forecast period are expected to be in Auckland. The region is forecast to experience a decrease in activity over the forecast period, however, it will remain the largest market for building and construction in the country.
Waikato/Bay of Plenty
Overall building activity in Waikato and Bay of Plenty is expected to have small fluctuations. Non-residential activity is forecast to remain stable, and the decrease forecast in residential activity is expected to be offset overall by the increase in infrastructure activity.
Wellington
Infrastructure building activity in Wellington is expected to see good growth over the forecast period. The increased value of infrastructure building work is forecast to support the decreased value in other areas and allow the region to start and finish the forecast period with similar overall construction values.
Canterbury
Residential and non-residential building activity have seen significant growth over the last few years in Canterbury. Expectations over this forecast period see the region decrease overall to levels similar to before this growth. Infrastructure and non-residential activity is expected to remain steady with modest increases in infrastructure activity towards the end of the forecast period.
Otago
Building activity in Otago has been strong and consistent since it was separated from the Rest of New Zealand reporting category in 2020. In the short-term forecasts show a continued increase in non-residential and infrastructure building activity, all areas are expected to decrease before moving back into growth towards the end of the forecast period.
Rest of New Zealand
The 10 remaining regions in New Zealand are reported combined under the ‘Rest of New Zealand’ reporting category. Infrastructure building activity, largely related to the extreme weather events recovery and building resilience to future events, is expected to increase and support the regions overall given an expected reduction in residential building activity.
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