Stats NZ says the volume of residential building work dropped 2.4% on a seasonally adjusted basis in the December quarter - but non-residential construction rose 4.6%

House building activity slumped in the fourth quarter of last year - but non-residential building work increased quite strongly.

Statistics NZ says the seasonally adjusted volume of residential building work put in place was $5.6 billion, which was down 2.4% on the previous quarter.

Compared with the December quarter in 2022 the figure was down by some 5.6%.

However, the value of non-residential work was $3.1 billion in the December 2023 quarter, up 4.6% compared with the September 2023 quarter.

“The rise in non-residential building work offset a decrease in residential building work, which led to total building activity being flat for the December 2023 quarter,” Stats NZ's construction and statistics manager Michael Heslop said.

The total volume of building activity in New Zealand was $8.7 billion in the December 2023 quarter, down 0.1% compared with the September 2023 quarter.

Seasonally adjusted volume estimates remove the effects of price changes and typical seasonal patterns. These figures also measure the amount of work actually carried out - as opposed to the building consent figures that measure approvals for building work. The consent figures have also been dropping sharply for residential developments.

Westpac senior economist Satish Ranchhod said trends "were mixed" across sectors.

"Weakness has been centred on the residential sector. The level of residential building fell 2.4% in the December quarter and is now down 9% on the levels we saw last year."

Ranchhod said the overall results for the quarter were in line with his expectations.

"Building activity is slowing, especially in the residential sector. However, that slowdown has been from an elevated level – even with the softening over the past year, we’re still building a large number of new homes each quarter.

"Over the coming year, we expect that residential building activity will continue to soften. With high interest rates and a subdued housing market, fewer new projects are coming to market (residential consent numbers have fallen nearly 30% over the past year). However, with many firms still working through existing pipelines of projects, that downturn is expected to be gradual.

"Non-residential construction activity is continuing to track at high levels. However, softening economic conditions are putting the brakes on the number of new projects coming to market, and we expect a downturn over 2024," Ranchhod said.

Stats NZ said the total value of building work was $37 billion in the year ended December 2023, up 7.1% from the year ended December 2022.

Value estimates of building work put in place, in contrast to volume estimates, include changes to building costs over time (such as material and labour costs).

In the past 12 months, the capital goods price index recorded a 5.7% increase in non-residential construction prices and a 4.3% increase in residential construction prices. Included in those overall calculations were the facts that residential construction prices rose 0.8% in the December 2023 quarter, while non-residential prices rose 1.0%.

By region, the value of total building work in the year ended December 2023 compared with the year ended December 2022, was:

• $15 billion in Auckland (up 9.0%)
• $3.6 billion in Waikato (up 4.9%)
• $3.2 billion in Wellington (down 0.6%)
• $5.8 billion in the rest of the North Island (up 1.6%)
• $5.5 billion in Canterbury (up 15%)
• $3.8 billion in the rest of the South Island (up 6.9%).

By region, the actual value of total building work in the December 2023 quarter compared with the December 2022 quarter, was:

• $3.9 billion in Auckland (up 6.5%)
• $886 million in Waikato (down 4.8%)
• $805 million in Wellington (down 4.0%)
• $1.5 billion in the rest of the North Island (up 4.1%)
• $1.4 billion in Canterbury (up 9.6%)
• $978 million in the rest of the South Island (up 0.5%).