Building work put in place

Residential construction at record high in June quarter

5 Sept 2022

Our take on the latest Building work put in place (Mon 5 Sept 2022)

Total construction volumes up 3.4%pa in June

Residential construction activity up 3.2% from March (sa)

Construction of hospitals and factories both up 36%pa in June

Nominal building activity grew 19%pa in June 2022, but large cost increases mean real building volumes only grew 3.4%pa.
Residential and non-residential activity both grew in the June quarter, with residential work put in place up 3.2%, and non-residential work put in place up 1.6% (both figures seasonally adjusted). After adjusting for rising costs and seasonality, residential activity was at a record high in the June quarter, with nominal activity totalling $5.8b. Non-residential activity totalled $2.6b.
Growth in non-residential building activity has been spread across several building types, with construction of offices growing at the fastest rate, up 38%pa in June, and work on hospitals and factories both up 36%pa. The only non-residential building type to experience a decline in construction volumes was accommodation building, which fell 34%pa.
Residential construction activity remains very strong, with activity in Canterbury increasing at the fastest rate, up 27%pa in June, and activity in Wellington and Auckland growing 26% and 24%pa respectively. Provincial New Zealand is also seeing increasing residential construction volumes, with work put in place in North Island areas (excluding Auckland, Waikato, and Wellington) growing 9%pa, and work in South Island areas (excluding Canterbury) up 22%pa.

Quarterly totals, seasonally adjusted, Sep 1999 $m

Real construction activity grew again in June, with the industry buoyed by continued growth in the volume of consents issued over the last 12 months. This pipeline of consents means the headwinds affecting other areas of New Zealand’s economy, including inflation, rising interest rates, and low confidence, seem to be having little effect on the construction industry at this stage.
Growing activity in the non-residential construction sector was expected in June, and the strength across a variety of build types was reassuring. Strong growth in hospital building is largely a product of fiscal policy, growth in factory building reflects disrupted global supply chains and the impact of COVID-19, and office building is enjoying a strong recovery from the pandemic lows, suggesting a return to a physical workplace for many New Zealanders.
The June quarter was the busiest on record for the residential sector, but with annual dwelling consents still running at over 50,000, there is plenty of residential work yet to be done.
Given the high level of activity across several construction sectors, and the strong pipeline of future work for the next 12 months, construction volumes could grow further between now and mid-2023. Constraints on the availability of labour would be the most likely driver of slowing activity in the near term, while rising costs could undermine the viability of developments and see some projects deferred or cancelled.

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