Non-residential building activity was up 20 per cent. Photo / Greg Bowker
Non-residential building activity was up 20 per cent. Photo / Greg Bowker
Building activity volume levels came off the boil lately in the first drop since the pandemic stopped all but essential construction work two years ago.
Stats NZ’s value of building work put in place showed volumes down 1.6 per cent from the September to the December quarters.
That’s partly dueto new house consents dropping but sector inflation running at double digits has also been mentioned.
In the December quarter, $8.9 billion worth of seasonally adjusted building work was put in place, down on the $9b in the September quarter. That work is commercial as well as residential.
Michael Heslop, construction statistics manager, said the latest data showed the first fall in the total volume of building work since the Covid-19-impacted September 2021 quarter when the national alert level 4 ran for a fortnight but Auckland’s ran for many weeks.
New house consents have come off the boil lately: 49,480 consents were issued in the year to January, yet consents had been running at all-time highs last year, above 50,000 annually.
“The fall in residential building activity partly reflects the number of new homes consented, which peaked in early 2022,” Heslop said today.
The value of all building work put in place was $34b in the year to December, up 20 per cent annually.
Value estimates of building work put in place include changes to building costs over time like material and labour costs.
In the past year, residential construction costs rose 13 per cent and non-residential costs rose 10 per cent, Stats NZ said.
Non-residential building activity was up 20 per cent and the building types that contributed most were offices, administration and public transport buildings at $1.7b up 46 per cent, storage buildings at $1.6b up 40 per cent and factories and industrial buildings at $1.6b up 33 per cent.
Westpac senior economist Satish Ranchhod said the data was weaker than expected.
“We had been forecasting a modest 1 per cent rise. However, estimates of the amount of building work in the September quarter were revised up, meaning that the level of activity remains elevated,” he said.
Satish Ranchhod, senior economist at Westpac. Photo / Doug Sherring
Building activity eased back in the December quarter, but the sector is continuing to run hot. The amount of residential and non-residential work being completed remains very high, Ranchhod said.
“However, a peak in the building cycle is approaching. Capacity constraints – especially shortages of skilled staff – remain a handbrake on how quickly projects can be completed. In addition, financial conditions in the construction sector have become a lot tougher. Operating and financing costs have risen sharply over the past year. And at the same time, house prices are tumbling in many parts of the country,” he said.
One sector leader remains confident, though.
Rob Gaimster, Concrete NZ’s chief executive, said this month that high demand for concrete was expected to continue this year and next, particularly for infrastructure and non-residential construction projects in Northland, Auckland, Tairāwhiti Gisborne, and Hawke’s Bay.
Ready-mixed concrete production was one measure of construction and infrastructure activity and general economic health. That had already increased by 1.5 per cent in the December quarter, he said.
“While the final quarter of 2021 stood out in terms of production, a comparison of volumes in the year to December 2021 versus the year to December 2022 shows production actually rose by 3 per cent in the year to December 2022,” he said last week.
Commercial consents were forecast to continue at record levels during the next two years, while the total value of infrastructure projects was anticipated to increase, even without modelling to factor in works related to Cyclone Gabrielle.
According to the National Infrastructure Pipeline report, the total value of infrastructure projects was forecast to increase and might have hit $76.9b late last year, he said.
“This growth is encouraging for the construction sector as a whole but also supports wider economic stability and well-being as infrastructure drives higher living standards, strengthens the economy, and results in better social and environmental outcomes.
“Pleasingly, we anticipate that this will include increased uptake of the industry’s decarbonised concrete products.”
The sector was trying to reduce its climate impact, with low carbon concretes to be used in Kāinga Ora Bader Ventura development in Māngere, Gaimster said.
