For the second quarter in a row, construction activity has declined - albeit from a high level - supporting anecdotal evidence that the sector is up against capacity constraints.

So it is a worry that official data on visa issuance suggests immigration has been making a negligible marginal contribution to the supply of skilled workers in the building trades.

Statistics New Zealand's June quarter data on building work put in place, released this week, records a decline of 0.5 per cent in real seasonally adjusted terms from March, which in turn had been 3.3 per cent down on the December 2016 quarter.

Growth in both residential and non-residential building activity has been on a declining trend since March last year.


In dollar terms, the building work undertaken in Auckland - at just under $2 billion - was up 6.8 per cent on the same period last year. But that compared with stonking annual growth of 39 per cent in the year to June 2016.

The statisticians' smoothed or trend series shows the growth in residential building work in Auckland peaked in the March quarter last year, has been trending down since then, and turned negative in the latest June quarter.

It indicates the level of activity has plateaued, though at a high level historically. As there tends to be a lag of almost a year between building consents being issued and the actual work being done, the fact that consents for dwellings have been pretty flat for a year now, both nationwide and in Auckland, suggests that picture will continue for a while yet.

As the Treasury notes in its pre-election economic and fiscal update, the slowdown in dwelling consents has been most pronounced in Canterbury, reflecting a winding down in post-earthquake rebuilding.

"The lower level of activity in Canterbury may release resources for use elsewhere and increased availability of public finance may hasten the pace of infrastructure investment," it says.

But on the other hand - there is always that other hand - mortgage rates could rise further and high levels of household debt may have made borrowers more sensitive to interest rate rises than it has assumed.

"Nationally, activity in the [construction] industry is at a high level and there is some evidence from surveys and discussion with businesses that the supply of labour and other resources are tight and are constraining growth in activity, particularly in Auckland," the Treasury says.

The Reserve Bank, in last month's monetary policy statement, expects residential investment to increase over the next year, despite recent weakness, albeit to a lower level than it previously assumed.

However, it goes on to note that "Capacity pressure in the construction sector appears to be increasing, and there has been some tightening in lending standards for residential property development over the past year."

Private sector economists are generally bullish about the outlook for construction.

Westpac's, for example, point to a large pipeline of work planned, especially in Auckland, where about a decade of strong building is required to address the existing shortfall of housing and keep up with surging population growth.

ASB economists say the construction sector is beginning to show that it is suffering from growing pains. "Capacity constraints have seen construction costs rise sharply, suggesting that growth rates will struggle to remain at these levels going forward."

As labour is one of those key constraints, it is instructive to look at what contribution immigration has been making to the supply of tradesmen.

Spoiler alert: it is not encouraging.

In the year to June 2016, New Zealand issued 193,000 work visas, the Ministry of Business, Innovation and Employment reports. This does not include 91,000 student visas which confer some limited work rights.

Of the 193,000 work visas, only a sixth (32,000) were in the essential skills category. The rest were to people on working holidays, family members, people in a transitional study-to-work category and seasonal workers for the horticulture sector.

Of the 32,000 people granted visas under the essential skills category, only one in four were first-timers. The rest were temporary migrants already here. So it is not a case of 32,000 people being added to the skilled workforce that year.

And a startlingly low proportion - 7 per cent, or 2233 to be precise - were classified as construction trades workers like carpenters, plumbers, plasterers, tilers and painters. If you include scaffolders and builders' labourers, the proportion rises to nearly 10 per cent.

If they are typical of essential skills work visa recipients generally, only 800 were not already in the country.

The 2015-16 year was not an aberration. The proportions were similar in the two previous years.

The conclusion has to be that the impact of net migration flows on the housing market and the construction industry is overwhelmingly on the demand, not the supply, side.

Labour market statistics tell a more cheerful story. The June household labour force survey found that the number of people employed in the construction sector rose 17,900 or 8.2 per cent in the year to June.

And the quarterly employment survey, a survey of firms, found that paid hours in the construction sector were up 8.5 per cent in the June quarter from the same period last year.

But the visa numbers do suggest that Labour's policy of introducing a new KiwiBuild category might be a good idea.

And they refute the notion that reining in immigration flows overall will condemn more and more Aucklanders to live in garages or cars.