Introduction
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The building and construction sector is a vital pillar of New Zealand’s economy. For the year ended March 2023, it contributed 6.3% of the country’s real Gross Domestic Product (GDP) – amounting to over NZ$17.6 billion [1],[2]. It also employed nearly 308,500 people (or 10.7% of the country’s total workforce) in the year ended June 2023.
The sector’s contribution to GDP has grown modestly since the early 2000s. However, this upward trend has slowed since the latter part of 2022. The sector faced several challenges over this period, including mounting inflation, rising interest rates, and severe weather events. Despite these setbacks, non-residential construction building activity increased by 28.3% over the year to June 2023.
Events over the past year, particularly the Auckland Anniversary floods and Cyclone Gabrielle, highlighted New Zealand’s vulnerabilities to climate threats and the urgent need for robust disaster response, recovery, and adaptation strategies. In response to these, the government allocated an initial NZ$6 billion for the National Resilience Plan (The Treasury, n.d.) to ‘build back better’ from recent weather events, and future-proof and strengthen critical infrastructure networks.
Strategic investment and sustainable practices are essential for fostering a resilient construction sector in the future. New Zealand’s innovation goals are aligned with global sustainable construction efforts, as demonstrated by various initiatives undertaken by the government and the industry. The Building for Climate Change Programme envisions near zero building-related emissions by 2050 (MBIE, n.d.). In line with this vision, new policies such as the Building (Modular Component Manufacturer Scheme) Regulations 2022 (Parliamentary Counsel Office, 2022) and the upcoming Building Act Amendments (MBIE, 2022a), aim to enhance modular building standards and climate resilience. Alongside these regulatory initiatives, voluntary metrics emphasise New Zealand’s transition towards a more sustainable construction industry. These metrics include the New Zealand Green Building Council Green Star rating (New Zealand Green Building Council, n.d.), the Homestar rating system (New Zealand Green Building Council, n.d.), and the Passive House certification (Passive House Institute New Zealand, n.d.). Moreover, through the Construction Sector Accord (the Accord), the industry and government have collaborated to implement a range of initiatives to tackle the sector’s challenges and foster resilience within the building industry.
Local and global ripples in construction
New Zealand experienced several severe weather events in 2023, including the Auckland Anniversary flooding and Cyclone Gabrielle.
The Auckland Anniversary flooding in January caused extensive damage to infrastructure, homes, and businesses in the Auckland region. Cyclone Gabrielle which followed in February dealt widespread damage to the upper and central parts of the North Island. The Treasury estimates the total damage of these events to range between $9 billion to $14.5 billion (The Treasury, 2023a).
This widespread damage requires a significant amount of rebuilding and repair work and is expected to stimulate demand for building and construction services in the foreseeable future (The Treasury, 2023b). To address this need, the New Zealand Government allocated a billion-dollar flood and cyclone recovery package as part of Budget 2023 (National Emergency Management Agency, 2023). The package prioritises essential repairs to roads, railways, and schools, while also investing in proactive measures to prepare for future events and enhance flood protection.
The war in Ukraine was one of the most significant geopolitical events impacting the global economy, including New Zealand, in 2023.
Shortly after the war started in February 2022, the New Zealand’s Foreign Affairs and Trade assessed that the most significant impacts of the war would be indirect primarily through higher fuel and commodity prices, financial market volatility and the potential drag on global economic activity (New Zealand Foreign Affairs and Trade, 2022). In August 2023, the New Zealand Security Intelligence Service reported that the ongoing impacts of Russia’s invasion of Ukraine are being felt internationally through disruptions to supply chains (New Zealand Security Intelligence Service, 2023).
The conflict had some impacts on the construction industry, both directly and indirectly. Global oil prices rose sharply in response to the conflict, increasing the cost of fuel for transport and machinery used in construction projects. It also affected the supply and demand of other commodities used in construction, such as aluminium (Reserve Bank of New Zealand, 2022). However, the global chain disruptions from the war have since eased and the prices of commodities, particularly oil, have now stayed lower than their peaks in early 2022.
Purpose of the report
This report provides an overview of the significant trends in New Zealand’s building and construction sector - offering insights into its current state, challenges, and opportunities. It also sheds light on global innovations in building design, technologies, and materials.
The report contributes to fulfilling the requirement of Section 169 of the Building Act (2004) (Parliamentary Counsel Office, 2023), which mandates the Chief Executive to monitor current and emerging trends in building design, technologies, and related matters, and to provide an annual report to New Zealand’s Minister for Building and Construction.
Research approach and limitations
This report draws upon extensive desktop research conducted between May and September 2023. Construction sector data is primarily sourced from Statistics New Zealand (Stats NZ), with additional insights derived from the Building System Insights Programme (BSIP) products, such as the State of the Building and Construction Sector 2022. Other industry reports, research papers, and surveys from various sources also contributed to the analysis. A comprehensive list of all data sources used can be found in the References section on page 40.
The data presented in this report covers the period from 1 July 2022 to 30 June 2023. While this timeframe served as the primary focus, certain annual comparisons required adjustments to specific reporting months to align with data availability. These adjustments were clearly indicated throughout the report.
This report acknowledges the following caveats:
- The data presented, particularly in figures and tables, is valid for the dates specified.
- Certain data, such as GDP and workforce, are subject to ongoing reviews. Figures included were accurate at the time the desktop review was undertaken but may not be the most recent at time of publication. We advise caution when using these figures.
- Identified trends are based on the information available at the time of research and are subject to change due to various factors, including market conditions, regulatory changes, or unforeseen events (such as natural disasters and pandemics).
Footnotes
[1] Annual GDP figures for the year ended March 2023 has been revised in the September release - Gross domestic product: September 2023 quarter(external link) | Stats NZ
[2] as expressed in 2009/10 prices