Residential Building Activity at Record High

It may surprise you to know, that despite residential building activity being at an all time high, the number of new homes consented was higher in the 70’s and 2004 compared to recent months. This is probably due to new builds becoming increasingly bigger, more complex and stringent post-quake regulations to comply with.

Statistics New Zealand have released the percentages for the third quarter which show total building activity has advanced 2.7 percent in in the three months ended Sept. 30. The biggest increase was in new residential building work, which was worth $3.606 billion in the third quarter of this year, compared to $3.357 billion in the second quarter of this year and $3.286 billion in the third quarter of last year.

While the level of residential building activity is elevated, and firms continue to report that they are extremely busy, what is clear is that the construction sector is struggling to grow further. Capacity, cost and capital constraints are acting as caps. An increase in workers is key to implementing change in productivity and getting building back onto the fast track.

Non-residential building reached its peak in 2016 and growth in this area has been slowing ever since. Residential work gained 5.2 percent on a seasonally adjusted basis while non-residential work increased 1.6 percent in the quarter. Economic growth and a potential oversupply of office space is likely to further restrict activity by 2019.

The SNZ data measured building work put in place, while building consents issued, which showed a decrease for October, indicates the pipeline of upcoming building work. Housing construction demand is likely to slow in the near term due to uncertainties from the change in Government, but activity is expected to recover once the KiwiBuild programme commences.

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