The New Zealand building and construction industry is facing a challenging period, with a recent report indicating a significant downturn that shows no signs of improvement. This industry, once a key driver of economic growth, is now struggling to recover from a prolonged period of decline. The latest data reveals a concerning trend: the number of construction and building firms has decreased by 551 since the end of 2025, with a particular focus on the construction of flats and multi-family dwellings. This trend is closely tied to the housing market, where prolonged periods of market uncertainty and weak prices have led to a reduction in construction activity. The situation is further complicated by rising interest rates, weak business and consumer confidence, and the upcoming election, all of which contribute to an uncertain outlook for the industry.
One of the key challenges is the high number of liquidations and severe arrears in the industry. According to Centrix managing director Keith McLaughlin, the number of businesses going into arrears has plateaued, but the overall situation remains dire. The industry's reliance on the housing market means that any downturn in this sector has a significant impact on construction firms. The latest Stats NZ data supports this, showing a steady growth in households but a stall in the number of private dwellings.
The situation is exacerbated by the lack of a solid long-term commitment to infrastructure projects. Martin Bisset, a quantity surveyor, highlights the country's poor track record in getting projects off the ground. The industry's confidence has been hit hard by the war in Iran, which halted many projects and led to job losses. Certified Builders chief executive Malcolm Fleming emphasizes the need for bipartisan agreement on infrastructure projects to ensure a stable future for the industry. The loss of businesses not only affects the current pipeline of work but also the future availability of skilled workers.
The labour market is also experiencing a rollercoaster. Construction hiring saw a significant decline in 2024, with many people moving to Australia in search of work. However, a turnaround began in November 2025, followed by a 35% increase in construction jobs in the 12 months ended March 2026. SEEK describes the construction sector as an 'engine of annual growth' for the labour market, but the job ads data and construction activity data are at odds, indicating a complex and uncertain situation. The total construction activity fell by 7.8% in 2024 and another 4.1% in 2025, with the building work component weakening more sharply.
The industry is also grappling with rising costs, particularly in materials and fuel. Fletcher Building's market update highlights the impact of macro uncertainty and broader cost inflation on new projects, especially in the commercial sector. The cost of materials and fuel continues to be a significant issue, with the industry waiting for a moment to kick-start growth. The latest MBIE National Construction Pipeline Report suggests a slow recovery, with the combined value of building and infrastructure work expected to reach $65.4b by 2030, an increase of just 3.8% on 2023 levels. However, Bisset notes that most of the industry has a short pipeline of work, raising concerns about the future.
In conclusion, the New Zealand building and construction industry is facing a challenging period with multiple interconnected factors. The industry's recovery is hindered by market uncertainty, rising costs, and a lack of long-term commitment to infrastructure projects. The future of the industry remains uncertain, and the industry's ability to adapt to these challenges will be crucial for its survival and growth.
