The building industry is showing the first signs of a downturn, although it is continuing to operate at a cracking pace, according to the latest building activity report from Statistics NZ.
It found $9.327 billion of new building work was commenced in the December quarter of last year.
That was a record high and was up 19.7% compared to the same period of 2021.
However it was up by just $20 million compared to the September quarter of last year, suggesting a slowdown in the rate of growth.
Additionally, the building industry has been experiencing high inflation, with residential building costs up 13% last year and non-residential building costs up 10%.
When the effects of inflation are removed, the value of building work commenced in the December quarter of last year declined by 1.7% compared to the September quarter, with residential building work down by 2.0% for the quarter, and non-residential work down by 1.0%.
Those figures are provisional, but suggest building activity peaked in the third quarter of 2022 and started to to decline in the fourth quarter.
However in an industry facing capacity challenges, the effect of the small decline in activity evident in the December quarter figures may be having a minimal impact at worksites so far.
The inflation adjusted $9.15 billion of new work commenced in the December quarter was still up a healthy 6.7% compared to the same period of 2021, so the industry is not exactly sitting around twiddling its thumbs.
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26 Comments
Its a funny crossroads because councils, suppliers and other parties are all in the process of increasing pricing for consents, standards, and materials, while new home sales are flatlining.
In the case of councils, their inflation strategy is to keep rates low and charging more for resource and development costs. I wonder if they've factored in lower volumes of fees for the next 12-24 months - in which case the ratepayers going to get it eventually.
Upfront DC costs ultimately increase the value of (new as well as existing) homes. Is it time to try some other options.
Costs for new development will likely only escalate so either way it's inflationary for all housing. Potentially that becomes a chicken and egg scenario, councils can charge more because property is valuable but part of the scarcity is created by council.
"The scarcity is created by councils"
HamiltonCC is scratching their collective heads on how to remove $6m from the budget. If that means doing less infrastructure then new areas won't open up
Only $120 over 50,000 rating units. I am all for fast tracking to create extra supply even if it means paying more. Will be branded for that perspective
$6m is such a paltry amount when it comes to their overall budget I had to laugh and assume it was performative.
Things always appear calm when you're at the top of the cliff and haven't jumped yet.
The building sector is completely f**ked.
New residential housing is borked.
Renovations seem to be holding their own
Commercial has 2-3 years+ of runway in front of them
Unless you're talking about the overall state of the sector, in which case I'd agree, it's really, really nuts. Although I can't see it improving much either, maybe a sharp downturn will have a Darwinian effect.
Commercial is interesting, warehousing is in short supply, mostly because of bloated inventories. I'm picking these inventories will get cut in half over the next 12 months, and the demand on warehousing will fall out completely. Between that and business failures the tide will turn pretty quickly.
Retail and office space have been in major decline the last 3 years.
Agreed. Was taking to the owner of a spe ialist trade business last week. He was grumbling about having to do quotes again vs getting "just get it done" no quote require orders.
As artificial as the stupidity of cheap debt.
Is f**ked now or will be at some stage? This data implies there will be a good amount of construction this year.
These figures are for all sectors. And for starts in the last quarter of last year.
Lets see what starts are like for residential in Q1/Q2 2024. I expect there will be a big drop away.
Yip its a cluster. Their is a huge glut of houses, sections, developments... all thanks to the governments poorly organised housing plan and developers going mad because of the "Covid effect"
The dumb government was late to the party initialy but now they are building with no demand..... except demand from dole bludging car sleeping losers who will get free homes paid for by taxpayers ( build and rent)
No wonder nz is jn a fiscal hole
May Day 2024?
Commercial has 2-3 years+ of runway in front of them
lots of commercial dev going on in logistics corridors, like ardmore airport and surrounds etc.
I see Graeme Hart has pivoted to this space.
Surely the flooding events in Auckland and Hawkes Bay/Gisborne will push activity back up substantially in coming quarters?
Maybe for repairs, red stickered may well be demolished, But i think it will take time before they decide if the land can be rebuilt on at pakawai and esk... insurance payouts take time, IMHO demo may be more active then build for 6 months.....
*Duplicate.*
First signs, you have to be kidding me?! Been evident for some months as forward orders from suppliers had dropped. Flooring down 30% for some, bathroom ware also down a lot. Then the tradies trying to secure work from reliable developers going forwards. Stats walks backwards into the future, business walks into the future with a rear view mirror.
Did it all to themselves aided by the reserve bank. Price fixing, screwing of the buyers, over leveraging, too much ego. How many toys are being sold now?
I guess the info we get here is only as good and current as the official data. I have suggested before to be a bit more proactive with research and talking to people at the coalface
Surely THAT would require 'being in touch with the people'. Imagine talking to those at the coal face.
What goes up...
It is always worth remembering that plans change....especially when 'money' gets tight
Once you're committed, it's often more expensive bailing out.
Sometimes...but it is also worth remembering that the backing you thought you had can disappear like a mirage.
its not always a choice.
The building industry is showing the first public signs of a downturn,
There we go, that’s a bit more accurate.
It will be ok , there will be only one cockroach
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