Construction sector tipped to peak at $48.3 billion in 2024, driven by residential

A new contruction pipeline report forecasts New Zealand will add more than 44,000 new dwellings a year over the next five years. Photo / Jason Oxenham

New Zealand's construction sector is forecast to grow over the next three years, boosted by rising activity in both residential construction and infrastructure and dominated by Auckland.

On Monday MBIE released the National Construction Pipeline Report which forecasts that, after dropping 5.7 per cent to $42.6 billion in 2020, total construction is expected to grow steadily over the next four years to be worth $48.3b in 2024.

The outlook in the annual report is markedly stronger than during 2020, when researchers predicted that construction could drop by about a third to less than $30b in 2023. At the time the sector was braced for a sharp fall in residential construction.

But the analysis published by the Ministry of Business, Innovation and Employment now sees residential construction outpacing other types of construction to hit a peak of $27.8b in 2024.

A year ago, MBIE was forecasting that residential building would average below 30,000 a year over the next five years, but now it expects an average of 44,000 new dwellings a year, the majority detached.

Infrastructure, meanwhile, is expected to grow slowly but gradually from $9.2b in 2020 to $11.2b in 2026.

Auckland is by far the largest construction market in New Zealand and its dominance is expected to continue.

Already accounting for more than a third of New Zealand's construction activity in 2020 at around $17b, Auckland construction activity is expected to grow by about 11 per cent by 2026 to around $19b.

Waikato/Bay of Plenty is forecast to increase by 14 per cent to $7.6b by 2026, Otago by 27 per cent to $3.1b and the rest of New Zealand by 7 per cent to $6.8b.

Wellington, meanwhile is expected to shrink by 5 per cent by 2026 to $3.6b and Canterbury by 0.5 per cent to $6.2b.

MBIE's report acknowledged there were "significant uncertainties" around the forecasts, which could be impacted directly by the ongoing effects of Covid-19, which would have flow-on impacts on economic growth and immigration levels.

Building and Construction Minister Poto Williams said the sector had held up well in the face of Covid-19 restrictions.

"The sector can be confident that current levels of demand are expected to continue for some time," Williams said.

"Demand for housing remains strong and will continue to play a lead role in the industry's Covid-19 recovery, with residential construction forecast to keep growing for the next few years."