Building work put in place

Modest residential building fall as non-res rebounds

6 Mar 2024

Gareth Kiernan

Our take on the latest Building work put in place (Wed 6 Mar 2024)

Non-residential construction volumes up 4.6% in December 2023 (sa)

Residential construction volumes down 2.4% from September (sa)

Total quarterly activity 13% above forecast

The key numbers...

Total building work put in place was well above forecast in the December quarter, with non-residential activity 22% higher than predicted and residential work 9.1% above expectations.
The non-residential outperformance was spread across all building types. The biggest contributions to activity being above forecast were from factories ($127m higher than expected), education ($94m), and hospitals ($87m).
As a result of this strength, only two non-residential building types recorded a lower volume of activity than in the December 2022 quarter: storage buildings (down 12%) and farm buildings (down 5.1%).
Because new buildings make up a much larger share of residential construction, they also made the largest contribution to the higher-than-expected residential result. However, residential alterations and additions was a massive 22% above forecast for the quarter.
Residential activity is now declining in Auckland, Waikato, Wellington, and Canterbury, but is still higher than a year ago in the “Rest of the North Island” and “Rest of the South Island” regions. In contrast, annual growth in non-residential activity remains strongest in Canterbury (34%pa) and Auckland (27%pa).

Building's downturn is limited so far

Annual % changes in building work put in place volumes

...and our reaction

Work put in place data has been somewhat variable in recent quarters, particularly in the non-residential space. A weaker than-expected result in September 2023 had led us to revise down our peak in activity, but it now appears this softening was a temporary one, with activity reaching a new record high at the end of 2023.
Nevertheless, the 7.3% reduction in the volume of non-residential consents during 2023 points to a coming downturn in non-residential work put in place. The biggest declines in consents last year occurred for education buildings, (-20%), offices (-20%), farm buildings (-18%), and accommodation (-13%).
The decline in residential consents is flowing through into work put in place more slowly than expected, even allowing for the larger backlog of work associated with previous capacity constraints and supply chain disruptions in the industry. The 8.3%pa fall in the volume of new residential activity was slightly smaller than September’s 8.5% drop. With less new building work taking place, tradespeople are also more readily available to address the large backlog of alterations work, with volumes up 16% from a year earlier.
We continue to forecast that overall construction activity will weaken throughout 2024. However, today’s data suggests the pace of this downturn might be less sharp in the near term than previously expected. Today’s data also points towards the possibility of a less negative outcome for GDP in the December quarter than our initial estimate of a 0.3% contraction.

Latest updates

Premium

Building work put in place

Modest residential building fall as non-res rebounds

The key numbers...

Building's downturn is limited so far

...and our reaction

Latest updates

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