A government report shows that construction activity hit its peak following an increase in demand after Covid-19, but is now forecast to drop back to pre-pandemic levels
The Ministry of Business, Innovation and Employment (MBIE) has published the National Construction Pipeline Report 2023 providing a projection of national building and construction activity for the six years from December 2022 to December 2028.
MBIE commissions the National Construction Pipeline Report, which is jointly prepared each year by the Building Research Association of New Zealand (BRANZ) and Pacifecon (NZ) Ltd (Pacifecon), this is the 11th annual edition of this report.
There are four key findings in the report this year:
1. Construction activity returns to 2020 levels: Overall activity in the sector is forecast to experience a short-term decrease, returning to levels similar to 2020, and remain steady at that level before increasing from 2028.
2. New dwelling consents returning to more sustainable levels: The number of building consents issued in the last year suggest we have passed the unprecedented post-covid demand and are realigning with more usual levels of fluctuations.
3. Strong pipeline of work: The forecast value of non-residential building work remains steady over the reporting period, this is supported by recent increases and a projected value peak in 2023.
4. Strong infrastructure pipeline: Recovery from the extreme weather events in early 2023 and works to increase resilience throughout the country are key drivers in a projected increase in infrastructure works. The value of infrastructure work is expected to reach a new high in 2026 and remain steady from that point onward.
Key points by activity type
Residential
- The report forecasts a reduction in residential building activity to a more sustainable level of demand that aligns with the sectors capacity to deliver buildings ready for occupation.
- Over 200,000 homes are forecast to be consented over the next six years, almost half of which are expected to be multi-unit dwellings.
Non-residential
- The report forecasts the value of non-residential building activity to reach a modest high in 2024 and remain steady and consistent throughout the remainder of the forecast period.
- Commercial, education and health building activities make up three quarters of non-residential projects expected to start in the next year.
Infrastructure
- The report forecasts the value of infrastructure building activity to steadily increase to a new high in 2026 and remain steady at that new level, largely driven by the extreme weather rebuild and increasing resilience throughout the country.
- Nearly all of the infrastructure projects expected to start in the next year are transport, water and subdivision activities.
Key points by location
Auckland
- Almost half of the building consents in the forecast period are expected to be in Auckland. The region is forecast to experience a decrease in activity over the forecast period, however, it will remain the largest market for building and construction in the country.
Waikato/Bay of Plenty
- Overall building activity in Waikato and Bay of Plenty is expected to have small fluctuations. Non-residential activity is forecast to remain stable and the decrease forecast in residential activity is expected to be offset overall by the increase in infrastructure activity.
Wellington
- Infrastructure building activity in Wellington is expected to see good growth over the forecast period. The increased value of infrastructure building work is forecast to support the decreased value in other areas and allow the region to start and finish the forecast period with similar overall construction values.
Canterbury
- Residential and non-residential building activity have seen significant growth over the last few years in Canterbury. Expectations over this forecast period see the region decrease overall to levels similar to before this growth. Infrastructure and non-residential activity is expected to remain steady with modest increases in infrastructure activity towards the end of the forecast period.
Otago
- Building activity in Otago has been strong and consistent since it was separated from the Rest of New Zealand reporting category in 2020. In the short-term forecasts show a continued increase in non-residential and infrastructure building activity, all areas are expected to decrease before moving back into growth towards the end of the forecast period.
Rest of New Zealand
- The ten remaining regions in New Zealand are reported combined under the ‘Rest of New Zealand’ reporting category. Infrastructure building activity, largely related to the extreme weather events recovery and building resilience to future events, is expected to increase and support the regions overall given an expected reduction in residential building activity.
Analysis
The aim of the report is to provide awareness of the expected pipeline of work to support the sector’s strategic planning, investment in skills and equipment and coordination of construction procurement to meet the sector’s future needs.
“Having foresight into these areas could help mitigate uncertainty and allow for better preparedness across the sector,” says Michael Warren, Manager System Strategy and Performance.
“Several indicators show that the unprecedented post-covid demand for residential building, which saw record numbers of building consents issued, is alleviating and significantly reducing the demand on the sector.
“The overall activity forecast is positive, short-term reductions across various measures in the report suggest activity fluctuations in the sector are being less affected by COVID-19 and returning to a more usual pattern.
“Residential building activity is forecast to return to levels that align with the sector’s capacity to deliver buildings ready for occupation, settling the sector into a more sustainable level where supply and demand is much closer than it has been in recent years.
“Recovery from the extreme weather events in early 2023 and works to increase New Zealand’s resilience to future weather events, have resulted in a forecast for strong growth in the infrastructure pipeline over the next few years and strong activity in the regions where we expect to see this building activity commence.
“There are strong non-residential and infrastructure pipelines of work including works supporting education, health, fresh water, transport, and subdivisions creating space for future residential and non-residential building activity.”
