New Zealand construction pipeline feels COVID-19 impact

By Dominic Ellis
Report commissioned by Ministry of Business, Innovation and Employment forecasts short-term decline in construction activity due to pandemic...

A report commissioned by New Zealand’s Ministry of Business Innovation and Employment says the country’s construction sector is likely to continue to feel the impact of COVID-19 for the next few years.

According to the National Construction Pipeline Report 2020, which was released on December 21, a short-term decline in construction activity has been forecast, due to the COVID-19 pandemic.

The report provides a projection of national building and construction activity for the next six years, through to December 31, 2025, based on current settings. It includes national and regional breakdowns of actual and forecast residential building, non-residential building, and infrastructure activity.

“While there is a lot of uncertainty as a result of the pandemic, the Report expects a decline in the total value of construction through to 2023, before it starts to recover,” says John Sneyd, General Manager Building System Performance, Ministry of Business, Innovation and Employment.

Residential construction activity is the largest contributor of national construction, making up 55 percent in terms of value last year. Historically, residential activity is the most volatile to changing economic conditions and it is predicted this will be hardest hit by COVID-19, the report says.

Therefore, it forecasts that the value of residential construction will fall 43 percent from £12.5 billion in 2019 to £7.11 billion in 2023 because of an anticipated decrease in new dwelling consents from the high of more than 37,000 in 2019, to an average of 26,800 per year for the next six years.

“Despite the forecast, demand for residential housing remains strong at the moment. There is steady pipeline of demand and latest data show new home consents are currently at a 46-year high.

“Infrastructure construction is expected to increase, particularly in Auckland and Waikato/Bay of Plenty. Infrastructure is the only construction area forecasted to see sustained growth, reaching £5.35 billion in 2025– up 6.3 percent on 2019,” says Sneyd.

Furthermore, the report states that compared to 2019, Auckland is expected to see a reduction in total construction activity of 16 percent to £7.58 billion by the end of 2025. 

Waikato/Bay of Plenty is forecast to decrease by 18 percent to £2.91 billion, Wellington by 35 percent to £1 billion, Canterbury by 57 percent to £1.59 billion, Otago by 33 percent to £955 million and Rest of New Zealand by 29 percent to £2.49 billion.

Meanwhile, non-residential construction activity (including hotels, offices, retail outlets and industrial buildings) is forecasted to drop 42 percent nationally from £5.30 billion in 2019 to £3.07 billion in 2022 before recovering to £3.92 billion in 2025.

Multi-unit dwellings accounted for 41 percent of all dwellings consented in 2019. Multi-unit dwellings are anticipated to be hardest hit by the COVID-19 pandemic, particularly apartments, and these are forecast to account for 32 percent of all dwellings consented in 2022.

The Report is based on building and construction forecasting by the Building Research Association of New Zealand (BRANZ), and Pacifecon NZ Ltd data on researched non-residential building and infrastructure intentions, a statement from MBIE says.

The Report’s forecasts also modelled optimistic and pessimistic scenarios, taking into account lessons from the Global Financial Crisis but it points out that COVID-19 is an unprecedented event and there is still a significant degree of uncertainty around the forecasts.

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