Developers cautiously return as lower rates lift optimism
New Zealand mortgage advisers are heading into 2026 with a clearer sign that the residential construction cycle is turning – and that the next wave of new stock will be driven more by townhouses and other higher‑density options than traditional stand‑alone homes.
Stats NZ figures show 35,552 new homes were consented in the year ended October 2025, up 6.2% on the previous year. Economic indicators spokesperson Michelle Feyen (pictured left) said the composition of that growth matters.
“The lift we are seeing this year is being driven by higher-density homes rather than traditional stand-alone houses,” Feyen said in a media release. “Townhouses, flats, and units was the main contributor to this rise, supported by a rebound in apartment consents.”
Of the multi‑unit homes consented in the year ended October 2025, compared with the year ended October 2024, there were:
- 15,484 townhouses, flats and units (up 9.9%)
- 2,649 apartments (up 54%)
- 1,236 retirement village units (down 30%)
The number of stand‑alone house consents was 16,183, up 1.9% over the year. Regionally, Auckland accounted for about half of the rise in consents for townhouses, flats and units, with Otago, Wellington and Canterbury also contributing to the increase.
Westpac NZ senior economist Satish Ranchhod (pictured right) said the latest figures add to evidence that the construction cycle is nearing a turning point.
“October’s update on building consents provided further signs that a turn in the residential construction cycle is approaching,” Ranchhod said in a Westpac commentary.
“Looking through those month-to-month swings, the total number of homes consented over the past 12 months has risen to 35,500 – its highest level in more than a year. The annual total has been gradually rising for the past four months, with Auckland, Canterbury, and Otago driving much of that increase. We’ve also seen issuance in Wellington lifting off its lows.”
Monthly volatility, but trend is improving
In October 2025 alone, 3,520 homes were consented – up 23.5% on October 2024. Again, townhouses, flats and units made the largest contribution to monthly growth:
- 1,612 townhouses, flats and units (up 37%)
- 1,568 stand‑alone houses (up 15%)
- 194 apartments (up 6.0%)
- 146 retirement village units (up 12%)
When adjusted for seasonal effects, total new home consents fell 0.9% in October, following a 7.3% rise in September 2025. Stats NZ said the underlying trend in home consents has been rising since late 2024 and continued to lift in October 2025.
Ranchhod said the month‑to‑month moves mostly reflect apartment lumpiness.
“October saw a modest 0.9% drop in the number of consents being issued," he said. "That was a relatively small decline following the sizeable increases seen over the past few months. Notably, most of the fall related to consents for apartment buildings, which tend to be issued in batches, and which spiked higher last month.”
Developers still cautious, but more optimistic for 2026
Ranchhod said tough conditions are still evident on the ground, but sentiment is shifting.
"We’re also hearing increased optimism about the year ahead as a result of lower interest rates. That’s seen developers starting to bring more projects to market,” he said.
The Westpac economist expects home building to hold around current levels in the near term. "However, with the pipeline of new projects now lifting, we expect to see residential construction turning higher over 2026.”
No repeat of post‑COVID boom
While the lift in consents is encouraging, Ranchhod cautioned against expecting a return to the post‑pandemic building frenzy.
“Although low interest rates are supporting new development, population growth remains low and there have been sizeable increases in the housing stock over the past few years," he said. "Those factors are still weighing on house price growth and will also be a dampener on the pace of home building.”
Commercial consents still subdued
On the non‑residential side, the picture remains softer.
“In the commercial space, the pipeline of consented projects continues to track sideways,” Ranchhod said. “Office and industrial development have been more resilient, while the number of retail and hospitality projects has remained more modest.
“Lower interest rates will help to support a lift in commercial development activity over time. However, gains are likely to be gradual. Occupiers are cautious about expanding their operations until they are confident that the recovery is entrenched, and developers are similarly cautious about bringing new projects to market.”
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