Do 59% of New Zealand builders have less than a year's work ahead? Real house price declines could last until 2030! Can faster building approvals and greater autonomy turn the tide?

In the winter of 2025, New Zealand's construction industry faces an unprecedented test: weak demand, an uncertain outlook and constraints on policy reform, while a flood of housing stock leaves developers, builders and homebuyers alike unsure of their next steps.

An industry survey conducted by accounting firm BDO in April and May found that 59% of construction businesses had no more than 12 months of work on their books, with more than a quarter having only enough work to last six months. For an industry heavily dependent on medium- and long-term project planning, this is undoubtedly a warning sign.

 

BDO advisory director James MacQueen was blunt: “Although some large builders are still working through orders from the past two years, the industry as a whole has entered an ‘order drought’, which is particularly dangerous for small and medium-sized businesses.”

 

Behind the confidence crisis lies a continuing decline in projects

 

According to data released by Stats NZ, the total value of new building projects nationwide fell to a three-year low of just NZ$7,569,000,000 in the first quarter of 2025, down 10.2% from the same period last year. This was the fifth consecutive quarterly decline.

 

Stats NZ construction statistics manager Michael Heslop said: “This is the lowest level of construction activity since 2022. Residential construction in particular has declined for seven consecutive quarters, indicating that developers' confidence and financing conditions are weakening in tandem.”

 

Residential construction accounted for 63.1% of the NZ$7,569,000,000 in projects, but its quarterly value has fallen to its lowest level since 2021. Meanwhile, warehousing projects recorded an annual decline of 22%, while educational buildings also fell by more than a fifth.

Sluggish home sales have knock-on effects: stock levels, interest rates and slower development

 

 

The collapse in construction business confidence has clear causes. The downstream property market's struggle to clear stock is spreading upstream.

 

According to Realestate.co.nz, 34,415 homes were for sale nationwide at the end of May 2025, the highest level for that time of year in a decade. Although sales in May reached 7166, the highest for the same month since 2021, they were still insufficient to absorb new supply effectively, leaving selling pressure in place.

A deeper signal of market adjustment comes from changing long-term house price expectations. According to forecasts by Infometrics chief economist Gareth Kiernan, even if nominal house prices return to their 2021 peak around 2029, inflation-adjusted prices are still expected to be 20% below 2021 levels in 2030. That is a deeper fall than the 14% real decline during the 2008 global financial crisis. Cotality, formerly CoreLogic, also noted that although sales activity has picked up, prices have risen by only 0.5%, leaving the market overall in a “slow recovery”. Kelvin Davidson commented: “Current stock levels and labour market uncertainty will continue to constrain the pace of price recovery.”

REINZ chief executive Jen Baird said: “The market is clearly in a buyer-led phase. Although sales volumes have improved, prices remain constrained by stock pressures. Sellers unwilling to adjust their asking prices will face longer selling periods.”

 

More concerningly, many developers list only some of their homes on platforms, meaning hidden stock could put actual supply well above official figures. As analyst Greg Ninness noted: “New homes listed in Auckland may be just the tip of the iceberg. The actual number available for sale far exceeds what the market can see.”

 

The north–south divide: uneven confidence

 

Regionally, the BDO survey showed that construction businesses in the South Island were significantly more confident than those in the North Island:

• Among builders in Queenstown and Christchurch, 71% were optimistic about the future;

• In Wellington/Wairarapa (Wairarapa), the figure was 66%;

• In Auckland, it was just 53%, falling further to 52% elsewhere in the North Island.

 

These regional differences reflect the South Island's continuing benefits from housing construction driven by infrastructure and tourism, while major North Island cities facing pressure on population growth are experiencing declines in both volumes and prices.

 

Policy reform is accelerating, but can it put out the fire?

 

The government has not stood idle in the face of the industry downturn. At the end of April, New Zealand's Building and Construction Minister Chris Penk announced a system of “self-certification and time-limited inspections for building projects”, with legislation expected to take effect within the year. Its initial aim is to accelerate the delivery of 3000 homes annually.

Penk said: “Allowing reputable builders to self-certify demonstrates trust in professional skills and provides a strong corrective to lengthy approval processes. We cannot let every single-storey home get held up by 12 redundant inspections. That wastes time and money.”

 

The reform also includes:

 

• Allowing qualified builders, drainlayers and plumbers to issue compliance certificates without further council approval;

• Requiring councils to complete 80% of inspections within three days;

• Publishing performance data to encourage greater local government efficiency.

 

The industry has welcomed the policy. Master Builders said: “This reform can effectively reduce wasted time, giving homeowners and builders less uncertainty and greater confidence.”

 

Can construction escape its confidence crisis?

New Zealand's construction industry faces three challenges: a shortage of projects, excess stock to clear and institutional reforms that will take time to implement. Yet faint signs of hope are emerging:

 

• Mortgage rates continue to fall;

• Policy changes are speeding up approvals;

• Market demand is recovering in some areas.

 

Independent economist Tony Alexander said: “If policy reform, lending rates and confidence in employment prospects improve together, construction could bottom out and recover before the end of 2025. For now, however, most developers need to grit their teeth and weather a winter that will test their cash flow.”

 

For New Zealand's construction industry, this is both a low point and a turning point. The businesses that make it through the winter will not necessarily be the biggest or strongest, but those that adjust their thinking and embrace change first. The policy fast lane is open, interest rates continue their downward path, and the market's wait-and-see mood will eventually give way to real demand.

 

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