South Island resilience offsets slump in northern construction
New Zealand’s construction sector lost momentum in the December quarter, as fresh data showed a sharper-than-expected drop in building work put in place, driven by a steep fall in non-residential projects while housing activity broadly held its ground.
Construction volumes slide, commercial takes the hit
Official Stats NZ figures show the seasonally adjusted total building volume fell 3.1% in the December quarter compared with September. Within that, residential building volume slipped 1.1%, while non-residential activity tumbled 6.5%.
In current prices, the actual value of total building work was $7.7 billion, down 3.6% from the December 2024 quarter. Residential work edged up 0.6% to $4.9 billion, but non-residential work fell 9.9% to $2.9 billion.
Residential and non-residential construction prices each rose 0.8% in the quarter, as measured by the capital goods price index, adding to cost pressures even as activity eases.
Economists: housing near a floor, non-residential under pressure
Westpac NZ senior economist Satish Ranchhod (pictured) said the weakness in construction was deeper than anticipated.
“Building activity was down 3.1% in December. That was lower than our forecast for a modest decline, and well below market forecasts for a 1.9% rise,” Ranchhod said in a Westpac commentary.
He noted that the residential sector appears to have stabilised.
“Looking back over the past year, it looks like home building activity has found a base, with activity effectively trending sideways for much of the past year,” Ranchhod said.
He expects home building to “track sideways in the early part of 2026”, before a pick-up later in the year as “new dwelling consents having now risen to a two-year high” start to flow through to on-the-ground work.
The bigger drag is commercial building.
“The more notable softness was in non-residential work. The 6.5% drop in non-residential construction in December was much sharper than expected,” Ranchhod said, noting the fall was “widespread, highlighting that businesses remain cautious about major capital expenditure at this stage.”
Regional split: North Island weaker, South Island holds up
Regionally, the actual value of total building work in the December quarter compared with a year earlier was $3.1 billion in Auckland (down 2.5%), $646 million in Waikato (down 5.3%), $585 million in Wellington (down 9.8%) and $1.2 billion in the rest of the North Island (down 13%).
In contrast, Canterbury rose 4% to $1.3 billion, while the rest of the South Island was up 2.6% to $941 million, underscoring a clearer pocket of resilience south of Cook Strait.
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