Construction Outlook, Q2 2025 in New Zealand

We forecast total construction work done to decline 4.3% in 2025, down from our previous forecast of -3.9%. This downgrade comes mostly as a result of disappointing residential and non-residential approvals over Q4 2025, in addition to higher engineering construction taking place over Q4 2024 resulting in a small growth downgrade due to base effects. We now expect building to trough in mid-2025, later than in Q1 as we forecasted last quarter, and recover over the rest of the year. Activity levels are expected to improve further out, averaging 5.6% p.a. over the four years to 2029.

• Residential building work done is forecast to decline 7.2% in 2025, troughing after spending two years falling from a very high base. We expect household demand to find its bottom early this year, as the effect of the RBNZ’s rate cuts from August 2024 raise real disposable incomes alongside tightening in the labour market over H2. The sector will also find some support from a dwindling projects backlog.

• Non-residential building work done is forecast to fall 5.4% in 2025. The sector will be pulled down by slower growth in domestic demand and retail trade than we had expected, with commercial building leading the near-term decline. While improving domestic conditions will support commercial building later on in the year, a thin work pipeline will drag on the sector.