Building work put in place

Construction activity reaches new heights in September despite persistent cost pressures

6 Dec 2022

Joel Glynn

Our take on the latest Building work put in place (Tue 6 Dec 2022)

Total construction volumes up 3.8% in September quarter (seasonally adjusted)

Non-residential construction activity up 4.9% from June quarter (seasonally adjusted)

Construction of hospitals up 70%pa in September quarter

The key numbers...

Total construction volumes increased 3.8% from the June quarter, after stripping out the effects of building cost inflation, taking total work put in place to the highest level on record. Real construction volumes increased for both the residential and non-residential subindustries in the September quarter, up 3.1% and 4.9% from June respectively (all figures seasonally adjusted).
Building costs increased substantially in the September 2022 year, disguising the level of growth in construction activity. Nominal work put in place totalled $33b in the September year, up 20%pa, but real activity only increased 5.1%pa.
New Zealand’s major urban centres had strong residential construction activity in September quarter, with the value of residential work put in place in Canterbury, Wellington, and Auckland increasing 44%, 40%, and 35%pa respectively. Only Waikato and the provincial North Island recorded growth of under 30%pa.
Non-residential construction activity was strong in Waikato and Auckland in the September quarter, with the value of work put in place up 55% and 42%pa respectively. Non-residential work put in place was relatively subdued in Canterbury, where the value of activity increased by 14%pa, most of which will have been simply due to increased costs.
Hospital and factory building activity increased 70% and 68%pa in the September quarter, continuing the strong momentum of the last 12 months. The weakest build type was accommodation buildings, which fell 41%pa in the three months to September, although activity did lift slightly from the June quarter.

Building activity at record-high, despite rapidly rising costs

Index of seasonally adjusted work put in place, March 2018 = 1,000

...and our reaction

Building activity reached the highest level on record in the September quarter, both before and after accounting for substantial increases in building costs. The high level of consents over the last two years means construction activity has continued to increase. However, capacity constraints and overheated demand have meant that growth in work put in place has not kept pace with increased consenting, and it has also resulted in larger increases in construction costs.
We note that growth in activity compared with the September 2021 quarter is inflated by the nationwide COVID-19 lockdown (which persisted for an additional three weeks in Auckland). Annual growth in the December 2022 quarter will naturally be weaker, although the persistence of a hard boundary around Auckland into the December 2021 will have had negative flow-on effects for the supply of some materials through until late 2021.
Construction activity was stronger than anticipated in the September quarter, particularly in the residential sector, where volume growth of 16%pa from the September 2021 quarter was more than double the 7.3% increase estimated in our October forecasts. We still expect residential and non-residential work put in place to decline over the next two years, with residential activity declining more rapidly as the downturn in the housing market filters through to consent numbers and building activity.

Latest updates

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Building work put in place

Construction activity reaches new heights in September despite persistent cost pressures

The key numbers...

Building activity at record-high, despite rapidly rising costs

...and our reaction

Latest updates

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