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Building and construction industry trends

Building and construction activity

The New Zealand building and construction industry has experienced a period of high and increasing output due to: growth in population; the strength of the economy; relatively low mortgage rates; and social changes which decrease the average number of people living in each dwelling. 

Figure 3: Economic and construction industry growth (March years) 

Figure 3: Economic and construction industry growth (March years).

Residential construction

The number of consents issued for new residential dwellings declined during the first half of 2004. Overall, the quantity of residential housing supplied (as indicated by area and numbers of consents) appears to have peaked or is close to a peak.

Consents for new apartments were still relatively strong during 2004, which has helped maintain the number of new dwelling consents in Auckland and Wellington. 

Figure 4 Value of Building Consents (March years) actuals to 2004, forecast for 2005

Figure 4: Value of Building Consents (March years) actuals to 2004, forecast for 2005.

Non-residential construction

In contrast to the slowing of residential construction during 2004, the number of consents issued each month for non-residential construction increased rapidly.

Building costs

Building and construction costs increased by 10 percent over 2004. This was driven by a number of factors including demand for housing and constraints in supply. Costs of building a small house in Auckland increased by approximately 10 percent in the 2003 calendar year, and 5 percent in the 2004 calendar year. Although building cost inflation has declined since 2003, the rate of cost increase is still faster than for general inflation.  

Figure 5: Annual percent change in the cost of houses (BIA cost of building indices and median REINZ prices)

Figure 5: Annual percent change in the cost of houses (BIA cost of building indices and median REINZ prices).

The level of building activity is creating challenges within the sector. The Department is working to provide the sector with timely and robust information and guidance. It is also working together with territorial authorities to ensure that, during the implementation of the Building Act 2004, the sector successfully manages high levels of business as usual and the additional work to implement the provisions of the new legislation.