Auckland leads the way in construction growth

July 11, 2016.

Auckland leads the way in construction growth

Released today, the Rider Levett Bucknall (RLB) Forecast 80 report – New Zealand Trends in Property and Construction – confirms that Auckland leads the way in construction growth.

Prepared exclusively for RLB by the New Zealand Institute of Economic Research (NZIER), Forecast 80 shows construction demand strengthening across both residential and non-residential sectors.

Construction key driver of economic growth

Grant Watkins, Director of RLB in Wellington said, ‘Strong population growth continues to underpin construction demand. We expect construction will continue to be a key driver of economic growth in the New Zealand economy over the coming years, underpinned by strong migration-led population growth and low interest rates.’

Population growth helping outer regions

He added, ‘Reflecting the key influence of population growth on construction demand, Auckland leads the way in activity. But demand is broadening, with halo regions such as Waikato and Bay of Plenty benefitting from the spillover of strong population growth in Auckland.’

Additional housing needed to keep up with demand

According to the Forecast 80 report, housing supply continues to ramp up in Auckland, with around 9,500 dwelling consents issued in the region over the past year. However, with Auckland net migration rising above 31,000 over the past year, at least 10,000 additional dwellings would be needed just to keep up with demand from net migration itself.

Mr Watkins continued, ‘Demand remains strongest for standalone houses, with consents issued for apartments easing in recent months, following a marked lift over the second half of 2015. More high-density housing will be required to meet increased housing needs, but that depends on zoning plan decisions over the coming year.’

Earthquake rebuild wrapping up

Despite the 2015 highs easing as the housing part of the earthquake rebuild starts to wrap up, construction activity in Canterbury remains at a historically high level. Net inflows into the region should continue to underpin relatively strong residential construction demand over the next few years.

Economy defies volatile financial markets

The New Zealand economy showed decent momentum in the first quarter of 2016, despite volatility in the financial markets at the beginning of the year. Construction was a key driver of economic growth, as strong population growth boosted demand for residential, non-residential and infrastructure construction. Demand in the services sector also remains robust, reflecting the strengthening household sector.

Tourism boom a real boost

According to the Forecast 80 report, tourism remains a standout, having overtaken dairy as our top export earner. Lower fuel prices have increased flight capacity, with the growing number of long haul flights meaning more tourists are staying in New Zealand for longer, and spending more. The tourism boom has boosted activity and injected income into many regional economies.

More interest rate cuts possible

Mr Watkins concluded, ‘The Reserve Bank held the Official Cash Rate (OCR) at 2.25% in June, and expressed heightened concern at the reacceleration in the housing market in the wake of its OCR cut in March.’

According to Mr Watkins, further cuts in interest rates are possible. The Reserve Bank is growing increasingly concerned about the reacceleration in the housing market, but the subdued inflation outlook suggests scope for another interest rate cut.

RLB New Zealand Trends in Property and Construction July 2016


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About RLB

With a network that covers the globe and a heritage spanning over two centuries, Rider Levett Bucknall is a leading independent organisation in cost management and quantity surveying, project management and advisory services.

Our achievements are renowned: from the early days of pioneering quantity surveying, to landmark projects such as the Sydney Opera House, HSBC Headquarters Building in Hong Kong, the 2012 London Olympic Games and CityCenter in Las Vegas.

We continue this successful legacy with our dedication to the value, quality and sustainability of the built environment. Our innovative thinking, global reach, and flawless execution push the boundaries. Taking ambitious projects from an idea to reality.