Construction forecast to hit $43 billion

The annual National Construction Pipeline Report, which looks at the five-year construction forecast, shows strong activity through to 2024 with an earlier than predicted peak in 2021

The report, prepared by both BRANZ and Pacifecon Ltd, forecasts the maximum annual construction value to be $43bn in 2021, an earlier and higher peak than was forecast in the 2018 report.

“The report is a projection of national building and construction activity through to 31 December 2024, which helps provide certainty to the construction industry,” said Minister for Building and Construction Jenny Salesa.

The unexpected forecast is the result of an anticipated “levelling out of residential activity from 2020 onwards, as well as a tailing off on non-residential activity in 2021,” the report stated.

Forecast for each sector

In 2018, the split of construction value per activity was residential (58%), non-residential (22%), and infrastructure (20%).

Residential is forecast to grow moderately through to $26.8bn in 2023 with a levelling out expected in 2020. However, Auckland is forecast to go against the grain, with strong growth in residential activity forecast for the entire five-year period.

In 2018, the total value of residential activity in Auckland was $8.8bn. This is projected to reach $12.2bn by 2024 — 39% higher than previously forecast.

Non-residential activity is forecast to peak in 2021 at just over $9bn, an increase of 3.7% over current levels. This is expected to then decrease, falling 20% from the 2021 peak to $7.2bn by 2024.

Infrastructure activity is forecast to surpass non-residential activity by 2023 — the first time this will have happened since 2013. The report predicts a moderate increase to $8.3bn in 2024. This is the result of sustained growth in infrastructure activity combined with a decrease in non-residential activity.

This past year

New Zealand’s total construction value increased by 5% in 2018 to $39bn. This growth is set to continue to $43bn in 2021, followed by a slight decrease to $42bn by 2024.

Nationwide, dwelling consents increased by 6% from 2017 to 2018, and are forecast to increase by a further 9% in 2019. The forecast is for 224,500 new dwellings to be consented over the next six years, an average of more than 37,000 per year.

Regional comparisons

In 2018, all regions bar Canterbury saw growth in total construction. This trend is forecast to continue through to 2024.

Auckland is expected to see strong growth at 22%, Waikato/Bay of Plenty is predicted to see 13% growth, while Wellington and the ‘Rest of New Zealand’ are forecast to grow by 3% over the period to 2024. Canterbury’s decrease is expected to decrease a further 22% in 2024.

Compared to the 2018 forecast

The total construction value grew by 5% in 2018, which is 2% higher than predicted in the 2018 report. The 2019 report predicts slightly stronger growth in the coming five years when compared to the 2018 report.