Three factors could kill construction demand

Three factors are listed which could reduce demand for new buildings.

An immigration downturn; Australia's fortunes recovering with more Kiwis being drawn across the ditch; a decline in tourism numbers here: All could reduce demand for new construction, a new report says.

Rider Levett Bucknall's trends in property and construction report for this year's second quarter names these three factors as threats to the demand for new building.

"Three things, either alone or in combination, would need to happen to reverse the current long-term drivers of building activity," the company's report says.

The first would be a large reduction in visas issued by the New Zealand government for permanent and long-term migrants. While an election year carries the risks of populist policies, we note that unlike in the US and much of Europe, the New Zealand economy continues to grow strongly.

"Second would be an unexpected upswing in the Australia economy, enticing Kiwis back over the ditch. Our forecasts of trade-partner growth do not see this as likely.

"Finally, tourism numbers would have to fall from their historic highs. Again, the underlying drivers of growth - bigger, more fuel-efficient planes; rising middle classes in Asia and New Zealand comparative safety as a tourism destination - are all pointing to continued growth," the report said.

On Monday, Labour leader Andrew Little said Auckland building costs rose 17 per cent in the past year compared only 7 per cent nationally.

Using Statistics NZ material, Little said Auckland building consent costs rose from $1846/sq m in the year to March 2016 to $2153/sq m in the latest March year. That compares to the national rise from $1812/sq m to $1946/sq m, he said.

"Building costs in Auckland rose 17 per cent last year. We need change to build affordable housing. Clearly, the Auckland building industry is struggling to get the workers to keep up with demand," Little said.