Building work put in place

Non-res activity declines sooner than expected

5 Dec 2024

Matthew Allman

Our take on the latest Building work put in place (Thu 5 Dec 2024)

Residential volumes down 3.5% from June 2024 (sa)

Non-residential volumes down 2.8% from June 2024 (sa)

Total quarterly activity 3.3% below our forecasts

The key numbers...

The volume of building work put in place fell 3.2% in the September 2024 quarter from the quarter before. The drop was driven by falls in both residential and non-residential activity, down 3.5% and 2.8% (all figures seasonally adjusted).
Total building activity in the September quarter was 9.9% lower than a year earlier, the largest annual decline since 2011 (excluding the lockdown-affected June 2020 quarter). Activity has now fallen relative to a year ago for five consecutive quarters.
Residential activity was down by 14%pa, and it continues to be the main driver of the annual declines in total work.
The volume of non-residential work fell 1.6%pa, following on from the 0.9%pa fall in volumes in the June quarter. Annual growth in non-residential activity had been strongly positive since early 2022, but results for the last two quarters are the first consecutive annual falls in work since 2020.

Decline in residential volumes deepens

Annual % changes in building work put in place volumes

...and our reaction

The decline in construction activity continued in September, with quarterly and annual falls in residential and non-residential activity accelerating. Overall, the fall in total building work put in place was slightly larger than expected in the September quarter, with activity 3.3% below our forecast.
The underperformance was isolated to non-residential activity, which was 8.8% below forecast. Non-residential activity’s underperformance was driven by social building ($162m lower than expected). Storage and shop building were also $112m and $72m lover than expected respectively. In contrast, health and education building were above forecast by $99m and $54m respectively.
We expect further declines in non-residential activity as weaker consent levels since mid-2023 affect results. Although increased business confidence in recent months could provide some upside to the outlook over a 2-3 year horizon, the lags between investment intentions, consents, and construction activity mean that any positive effects will take time to work through the system.
Residential activity was largely in line with expectations, just 0.1% below our forecast. The pace of the decline in residential activity had appeared to slow in the June quarter, but a downward revision pushed June’s quarterly decline from a shallow -0.7% to -3.3%.
New dwellings make up the majority of residential construction, and new building work was 3.1% lower than expected and down 12% from a year ago. Lower new dwelling activity frees up tradespeople to work through the backlog of additions and alterations (A&A) work, which continued to be considerably higher than forecast, beating our expectations by 23%. However, the value of A&A work was 8.3% lower than the September 2023 quarter, which was the first annual decline since 2020, suggesting that the pipeline of jobs awaiting completion is now shrinking.

Latest updates

Premium

Building work put in place

Non-res activity declines sooner than expected

The key numbers...

Decline in residential volumes deepens

...and our reaction

Latest updates

Construction activity at a 10-year low

Non-residential work hammered as residential softens further

Non-residential activity continues to decline

Lower residential activity leads construction decline