Building industry downturn starts to bite

Property / news

The much anticipated building industry slowdown has arrived with residential and non-residential construction work both down

7th Jun 24, 9:53am by Greg Ninness

The much anticipated downturn in building work may finally be starting to bite.

The downturn has been well signaled by the decline in building consents. But because of the lag in time between projects being consented and work being undertaken, the slowdown has been anticipated rather than actual so far.

The latest building work figures from Statistics NZ suggest the slowdown arrived in the first quarter (Q1) of this year.

The total value of building work being undertaken throughout the country was $8.439 billion in Q1 this year, down 1% compared to Q1 2023, bringing an end to the latest run of building industry growth.

However, the decline is probably greater than those numbers suggest because the building industry has suffered from high cost inflation over the last couple of years, which would have propped up revenue figures even if the amount of work being undertaken was declining.

Statistics NZ's seasonally adjusted figures, which remove the effects of price changes, show the amount of building work being undertaken in Q1 this year was down 4% compared to a year earlier.

That was made up of a 4.8% decline in residential construction work and a 2.8% reduction in non-residential work.

"The total volume of building work in the March 2024 quarter was the lowest quarterly volume in the past two years," Statistics NZ construction and property statistics manager Michael Heslop said.

"The fall in building activity coincided with a 2.8% decrease in the retail sales volume of hardware and building supplies in the March 2024 quarter," he said.

The comment steam on this story is now closed.

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33 Comments

by Yvil | 7th Jun 24, 10:19am 1717712384

It's a shame we can't get more timely data, this data is already 3 to 5 months old, and therefore, not very useful. The same issue applies to inflation and GDP data, they just tell you what happened a while ago. Then the Reserve Bank sets policies for the future, based upon this very old data...

by Pa1nter | 7th Jun 24, 10:25am 1717712749

This often gets cited as being an issue, but central bank actions usually are 18-24 months to be felt.

Possibly why when things are really bad, they reach for the adrenaline.

by OldSkoolEconomics | 7th Jun 24, 11:23am 1717716181

Exactly. Turning around an economy is like turning the proverbial cruise ship... no sense rushing to turn the wheel... in fact that would probably result in chaos.

by Smudge02 | 7th Jun 24, 12:18pm 1717719500

In NZ's case, the Costa Concordia.

by nigelh | 7th Jun 24, 12:44pm 1717721041

We might be lucky. Don't have an Italian captain.

by redcows1 | 7th Jun 24, 2:07pm 1717726031

Probably Russian then. Taking a turn around cooks strait.

by Smudge02 | 7th Jun 24, 3:35pm 1717731311

Previous Captain did abandon ship when it was clear all was lost though.

by Larry76 | 7th Jun 24, 3:36pm 1717731393

Mr Key?

by tothepoint | 7th Jun 24, 5:14pm 1717737264

Fortunately, we've got timely data on the motor vehicle sales industry....... 😇

The monthly data shows that new car franchises are doing it real tough 😩 and the picture worsens further if you look at EVs alone. 😖 ⚰️

I sense that some big discounts 💰 will be in the offing for new cars between now and Christmas - and extending into 2026.

Indeed, there's a silver-lining for car buyers willing to flex their bargaining muscle a little. 💪🏼 You won't need to try too hard. 👍 😁

TTP

by Colin Cameron | 9th Jun 24, 2:14pm 1717899258

TTP hope so as trying to find a 70 series V8 landcrusier with low ks is bloody hard and they are going up in value as we speak

by HughJorgan | 7th Jun 24, 11:09am 1717715354

Would be good to have tangible volume data, like concrete.

Too much noise in anything consent related.

The big unknown for me is how far reaching this is. Auckland is stuffed but will it hit other regions like Queenstown? They have the same cost issues so it feels like musical chairs at the moment until a lack of demand hits the stop button.

Had a chat with my builder the other day about pricing and nothing has started to come down. He repriced a job and overall it was up slightly. Structural timber and steel did but that was earlier in the year.

by Pa1nter | 7th Jun 24, 11:38am 1717717098

A few items are susceptible to over supply, but if demand is weak, suppliers just produce less and need to get the same or more for it.

As for labour, also hard to get it lower, when inflation has been what it is.

by HughJorgan | 7th Jun 24, 1:01pm 1717722096

Yip, I think they are going to do lower volume and higher margin. Not enough competition in NZ to drive prices down.

by Pa1nter | 7th Jun 24, 3:36pm 1717731390

The same process works everywhere when there's a downturn, you can only lower prices so much before you don't bother operating.

In the States for instance, mills are shutting, supply is shrinking, and this is stabilizing prices, before they likely increase when demand returns.

by Zaphod The Flatulant | 7th Jun 24, 1:26pm 1717723584

Concrete poured is down 11% year on year.

https://www.stats.govt.nz/information-releases/ready-mixed-concrete-mar…

by Colin Cameron | 9th Jun 24, 2:17pm 1717899456

Hugh am sitting in Arrowtown this very moment and have been in Queenstown/Glenorchy the last couple of weeks. It is absolutely huming and talking to the trades as the wife an I stop at cafes and they have so much work on. From builders to landscapers all want more workers to get on top of the work.

by nktokyo | 7th Jun 24, 11:18am 1717715892

"starts" ?

What planet are you on?

by nigelh | 7th Jun 24, 12:58pm 1717721930

Chris Bishop was shooting his mouth off yesterday on an ex TV3 presenter's YT channel. There will be no BC or RC for granny flats less than 60m2 required. Only a chartered engineer required to sign off. If that comes to pass I'll predict the following in many areas. Sewerage will be backed up and overflowing. Water supply also affected with water running out at times. Cost to supply electricity likely to rocket if portions of the network become overloaded.

To overcome the cost for improving the infrastructure, councils will have to put up rates for everyone to cover the 3 waters cost usually imposed on those wanting a granny flat.

Watch the cost of chartered engineers to do this come in just under what an RC and BC would cost via the council.

One upside it'll start a building boom and we'll be back to "which year would you like you granny flat to be completed" (read more than a year.)

by nktokyo | 7th Jun 24, 1:33pm 1717723989

Ya reckon every time someone adds a dwelling council makes a corresponding investment in infrastructure capacity?

by nigelh | 7th Jun 24, 1:57pm 1717725449

No. The council may have excess capacity in some areas and not in others. You don't add infrastructure for a few connections but at some time it's required. It maybe two or three years down the line. Its a cumulative affect. A few are generally not an issue. The problem I have is that the majority of councillors are not financially astute and so officials pull the wool over councillors eyes as to where and how much money has been spent on the relevant 3 waters. Councillors have little interest in the lower level financial matters generally concerning themselves with governance and petty matters.

As an aside when the Labour govt announced 3 waters at some point after that they told councils that any accumulated development funds for 3-waters had to be passed onto central government. NP promptly spent or set aside those funds on some other capex projects and i think they were unrelated to 3-waters spending. I agreed with that but not necessarily how they handled the funds by not decreasing capex elsewhere. Ratepayers will be faced with making up those previously accumulated funds.

by Property Leader | 7th Jun 24, 7:46pm 1717746407

That is a good question. My city councillor friend says they use the development levies pretty much as they choose. Just as well we have not let local councils loose on telecoms and power reticulation.

by rastus1 | 7th Jun 24, 2:56pm 1717728965

Neighbors around us were already unloading/building these things in their back yards - one of the reason we sold.

Add in the possibility of multilevel apartments appearing either next door or across the road and we though bu#### this, time to shoot through. Very disconcerting and make it risky to upgrade ones home with this going on

by Colin Cameron | 9th Jun 24, 2:21pm 1717899701

A standard house sewer connection (105 diameter waste pipe) can take 4 additional houses connected to it. Granted so long as that is PVC if Clay pipe with roots in it then yes you would have that problem.

by Eschaton | 7th Jun 24, 1:02pm 1717722133

Perhaps they should reduce their pricing.

by powerupkiwi | 7th Jun 24, 1:20pm 1717723206

Now is exactly the right time to kick off state housing/kiwibuild/whatever. Instead we had a govt that idiotically crowded out the private sector during a boom, and now the current govt is letting public development follow the property cycle downward, so that all our newly qualified trade staff piss off to Australia.

Well done. NZ is not a serious country. Total clown state.

by HouseMouse | 7th Jun 24, 1:44pm 1717724656

100%!!!

by wingman | 8th Jun 24, 3:37pm 1717817872

The last thing this country needs is more failing state-controlled businesses employing thousands more civil servants.

by Pa1nter | 8th Jun 24, 3:42pm 1717818164

The amount of time it takes a government to devise and commission projects usually greatly exceeds the duration of a downturn.

by MikeM | 7th Jun 24, 3:18pm 1717730326

For some reason it's not until construction tanks in Auckland that there's a wider acknowledgement of a construction recession. It's not official until it's happening north of the Bombay Hills.

by DIYman | 7th Jun 24, 6:14pm 1717740879

Look close at the concrete data region by region , the big drops are the lower North Island, they might be due to a shift away from structural concrete for EQ reasons, Christchurch holding up might be due to the new stadium under construction.

by wingman | 8th Jun 24, 12:31pm 1717806707

Immigrants still pouring in (esp. to Auck), construction down, NZD down, high interest rates, less subdivision, more Council red tape, lots of sombre predictions.....all adds up to more demand and higher property prices.

Great time to dip your toes in the water and be a contrarian.

by NZGecko | 9th Jun 24, 11:09am 1717888162

There is an avalanche of unsold new and used housing throughout Auckland now and many new builds still to be completed .......

From July 2024, the exiting from investment housing (are Bad, Bad, money suckers, not true investments) will be seen as a biblical flood.

This crashed Auckland market, now down a REAL -40% from peak, will continue this snake ride down to a bottom in 2027 with a floor of 8 to 10% yields.

This would be down a REAL -60% from peak.

Any fools knows the new immigrants tap is now switched off and the recent third world arrivals are living 20x to an Auckland shack. The market is continuing to plummet, this shows the truth of the lack of wealth, the immigrant surge" has contributed. They added no housing market stimulus, ZERO....apart from some overloaded rentals.

They come in dirt poor and will soon leave, when the construction side eventually slows to a halt.

by wingman | 9th Jun 24, 4:39pm 1717907953

Most of the unsold stuff is rubbish, who would buy some of those boxes? Many of them built by cheap imported labour.

There's been no housing crash here, 2 of my neighbours have just sold for around $2m, and that's more than the govt. valuation. Now's a great time to bet on property and drive a hard bargain.

'Buy in gloom, sell in boom.'