3 days ago
Construction sector on track for 2026 recovery, despite falling revenues
Construction activity was at the lowest level since 2019.
Photo:
Supplied/ Unsplash - Josh Olalde
The construction sector's revenues are still falling, though the industry appears to be on on track for a recovery in 2026.
The 2025 Building Construction Report indicates the industry's total revenue fell 5 percent to $94 billion in the year ended March, from $99b the year earlier.
"This has affected construction sector workers, owners and suppliers," report authors economists Shamubeel Eaqub and Rosie Collins said.
"The outlook is improving, but there are lingering risks," they said.
Among the risks were global uncertainty, slowing net migration, and reduced government spending with the private sector still in recession.
"A recovery may not start until 2026, as there is still very little work in architects' offices, meaning these positive signals may take some time to flow through to new projects."
Construction activity, excluding price effects and adjusting for a growing population, was at the lowest level since 2019.
"The construction sector is reliant on a broad range of suppliers, with payments to suppliers taking up $65 billion or nearly 70 percent of all revenue."
New Zealand Chinese Building Industry Association president Frank Xu said the industry's outlook was positive with opportunities in housing and infrastructure, with a backlog of consented projects ready to flow.
The report estimates New Zealand has an infrastructure deficit of $210b, with an estimated $1 trillion of public investment necessary to build and maintain infrastructure assets over the next 30 years.
"When that next upswing arrives, it will come with both opportunities and familiar pressures-labour shortages, productivity demands, and the need to adapt to changing conditions," Xu said.
He said it was important to improve staff retention and increase training as 37 percent of workers in the sector have been in their job for less than one year.
The likelihood of workers staying longer was also low, with just 6 percent of workers in the same job for five years or more.
"While the sector is subject to cycles, the structural trend is one of growth," Xu said, adding there needs to be a coordinated approach to ensuring the resources were in place to meet growing demand.
In the meantime, construction sector credit defaults were up 14 percent from 2024, with company liquidations up 48 percent, according to credit bureau Centrix.
"However, this paints an overly gloomy picture," the report authors said, adding the total number of construction enterprises was down about 1,000 from 2024's peak of 81,900," the authors said.
"This is because closures are highly visible but new businesses starting are less so.
"There are encouraging signs of a bottom in the cycle.
"Lower interest rates and rising mortgage applications suggest a thaw in the economy."
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