Building work put in place

Construction activity falls 5.0% from March 2023

6 Jun 2024

Matthew Allman

Our take on the latest Building work put in place (Thu 6 Jun 2024)

Residential volumes down 4.8% from Dec 2023 (sa)

Non-residential volumes down 2.8% from Dec 2023 (sa)

Total quarterly activity 1.6% above forecast

The key numbers...

Total building work put in place was narrowly above our forecast in the March quarter. The stronger-than-expected result was driven by non-residential activity, which was 6.1% higher than predicted, but residential work was 0.8% below expectations.
The non-residential outperformance was spread across most building types. The biggest contribution to activity being above forecast was from social building ($116m higher than expected), led by Canterbury, contributing 65% of nationwide social building activity, most likely driven by the construction of the new stadium. Shops ($63m) and factories ($63m) also contributed to this outperformance. The exceptions to the non-residential strength were storage and education building, coming in $119m and $21m respectively below forecast.
The value of non-residential activity was up 5.9% from a year earlier, driven by large increases in hospital activity (34%), shops (17%), and offices (15%). The only building types with a reduced value of activity from March 2023 were accommodation (-7.7%), storage (-6.0%), and education (-5.6%).
Residential activity was broadly in line with expectations, just 0.8% below our forecast. As new dwellings make up the majority of residential construction, activity coming in 4.6% lower than expected drove the overall result. Residential alterations and additions were a massive 28% higher than forecast, offsetting much of the lower result in new dwelling construction.
Residential activity has continued declining in Auckland, Waikato, Wellington, and Canterbury, but activity in the “Rest of the North Island” and the “Rest of the South Island” remains higher than a year ago. In contrast, annual growth in non-residential activity continues to be buoyed by strong growth in Auckland (21%), but Canterbury’s growth turned negative (-8.9%) for the first quarter since March 2022.

Non-res growth remains positive as res falls further

Annual % changes in building work put in place volumes

...and our reaction

Work put in place fell compared to a year earlier (5.0%), the largest annual decline since the lockdown-affected September 2021 quarter. The drop was driven by the fifth consecutive annual fall in residential activity, the first time such a sustained decline has occurred since June 2009.
Lower residential consent numbers in 2023 continue to flow through to weaker residential activity. The latest 4.8% (sa) quarterly fall in the volume of new residential activity was bigger than December’s 2.9% drop. With less new building work taking place, tradespeople are also more readily available to address the backlog of alterations work, with volumes still up 18% from a year earlier.
Annual growth in non-residential activity is slowing, although activity is still higher than a year ago. The reduction in the value of non-residential consents during the second half of 2023 points to a coming slowdown in non-residential work put in place.
We continue to forecast that overall construction activity will weaken throughout 2024. Today’s data was broadly aligned with our forecast at the aggregate level, suggesting the pace of this downturn is progressing as expected.

Latest updates

Premium

Building work put in place

Construction activity falls 5.0% from March 2023

The key numbers...

Non-res growth remains positive as res falls further

...and our reaction

Latest updates

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Non-residential activity continues to decline

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