New Zealand Construction Outlook, Q3 2025

We forecast total construction work done to decline 4.8% in 2025 and grow 5.5% in 2026. We have downgraded our forecast in response to disappointing residential and non-residential approvals over Q2 2025, as well as upwards revisions to 2024 engineering construction creating a negative base effect. We still expect building to trough in mid-2025, although we expect a more gradual recovery over H2 before more substantial growth over 2026. Activity levels are expected to improve further out, averaging 5.0% p.a. over the four years to 2029.

• Residential building work done is forecast to decline 11.2% in 2025 and grow 7.9% in 2026, troughing after spending two years falling from a very high base. We expect household demand found its bottom in Q2, and that the effect of the RBNZ’s rate cuts from August 2024 raise real disposable incomes alongside tightening in the labour market over H2. However, this recovery will be gradual, and we have lowered our medium-term forecast in response to continually disappointing data, particularly for attached dwellings.

• Non-residential building work done is forecast to grow 0.7% in 2025 and 6.0% in 2026. The sector will be pulled down by slower growth in domestic demand and retail trade than we had expected, which alongside competition from online retailers, we expect to slow the recovery of retail building. However, we have significantly upgraded our medium-term forecast for health building to account for the Government’s ambitious Health Infrastructure Plan.