…but quarterly fall shows another tough period for construction – Westpac

7th March 2025 By Staff Reporter | news@propertyticker.co.nz | @propertyticker

Westpac says the December 2024 quarter was another tough one for New Zealand’s construction sector, with building activity falling 4% over the past three months.

The latest building activity figures from Stats NZ today followed two straight years of decline, with building activity now down 18% from its peak in 2022.

“December’s fall in activity was spread across both residential and non-residential building,” Westpac said.

“Those falls were more pronounced than we had expected.”

However, the bank believed the sector was now “close to the bottom in the building cycle”.

“Non-residential building fell 3% over the past quarter,” Westpac said.

“While non-residential construction has been more resilient than homebuilding activity, it has still been trending down over the past couple of years.

“Weak economic activity has seen businesses winding back their capital expenditure and has also discouraged the development of new commercial space.”

The bank added that in the commercial sector, “lower interest rates and firming economic activity will help to boost both investor appetites and development activity over time”.

“However, we’re likely to see varied conditions across building segments for some time yet.

“Demand in the industrial / storage space is holding up, and we’re still seeing large amounts of office space in development.

“However, softer conditions in the retail and hospitality sectors are weighing on the amount of space being developed.” 

On residential, Westpac said the December quarter figures on building activity were down 25% from the previous peak.

“Tough financial conditions in recent years, including high build costs and a sharp rise in financing costs, have led to a sharp fall in homebuilding activity by both occupiers and developers. Those falls have been seen across the country,” stated the bank.

It added that people should not expect a notable turnaround until late 2025.

“While it’s been a tough time for the building industry, conditions in the sector are now changing,” Westpac said. 

“In the residential sector, it looks like we are now close to a floor in the building cycle with consent issuance having stabilised over the past year.”

With the recent sharp falls in interest rates, the bank expected a lift in the housing market over the coming months, “and that will encourage new housing development over time”.

“However, the recovery in building activity is likely to be gradual – we don’t expect a material lift until late in 2025.”