New Zealand home building hits 10-year low as house prices stall

[WELLINGTON] New Zealand home building has slumped to a 10-year low as a stagnating housing market and global uncertainty hit demand for new dwellings and alterations.

The volume of residential construction fell 5 per cent to NZ$17.6 billion (S$13.3 billion) in the 12 months through March, Statistics New Zealand said on Thursday (Jun 4) in Wellington. That’s the lowest March-year tally since 2016 and is a 25 per cent slump from the peak seen in 2023.

The building industry has struggled through a period of high interest rates, followed by a mix of geopolitical concerns that hit buyer confidence and weighed on the residential property market.

As house prices declined, developers became wary of committing to new projects, while home owners remained reluctant to sell their existing homes and invest in a new dwelling.

Prices have stalled this year as home-loan interest rates increase and the global energy shock hits household incomes. While an increase in building consents hints at a construction recovery, the medium-term outlook is less certain. 

“We expect to see home building activity turn higher through the latter part of the year, with the number of new dwellings consented up 11 per cent over the past year,” Satish Ranchhod, senior economist at Westpac in Auckland, said.

“What’s less clear is whether that momentum will be sustained as we head into 2027, with interest rates and building costs pushing higher, while house prices remain soft. Combined with broader uncertainty about the economic outlook, developers are likely to be cautious about initiating new projects over the months ahead.”

Thursday’s report showed non-residential construction volumes fell 9.9 per cent from the previous year – the lowest in four years – while total building work fell 6.9 per cent to a 10-year low.

The contraction poses downside risks to first-quarter economic growth projections even ahead of the full impact of the global energy shock which is expected to hit the economy hardest in the second quarter.

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The Reserve Bank last week forecast gross domestic product expanded 1 per cent in the three months through March but nil growth in the three months to June. 

Other partial indicators such as retail sales and net exports have been mildly positive for GDP, which is due Jun 18. BLOOMBERG