Growth in infrastructure construction is easing across New Zealand, according to Rider Levett Bucknall’s latest Infrastructure Forecast Report 004 – New Zealand Trends in Infrastructure Construction.
RLB Director Ed Cook said: “Along with the soft demand in other areas of construction, there are signs of excess capacity in the infrastructure construction sector. This is driving a slowing in construction cost inflation more broadly.”
The report, prepared exclusively for RLB by the New Zealand Institute of Economic Research (NZIER), found that while there has been a broad easing in construction cost inflation, civil construction cost inflation has remained relatively resilient. This reflects the substantial amount of infrastructure work still taking place, with capacity pressures in this sector not easing as much as in the residential sector.
Building sector firms show limited optimism
NZIER’s Quarterly Survey of Business Opinion indicates the construction sector is the least upbeat of those surveyed. Despite a sharp decline in interest rates since late 2024, the recovery in construction has been disappointing.
Waning optimism among building sector firms reflects weak demand, which has eroded pricing power and squeezed operating margins. While residential construction activity showed a slight lift in the March quarter, overall demand remains subdued.
The infrastructure pipeline remains positive
With lower interest rates slow to flow through the economy, RLB forecasts private sector construction demand will stay soft over the coming year. Infrastructure, however, shows greater resilience.
“The pipeline snapshot by Te Waihanga, the New Zealand Infrastructure Commission, shows infrastructure projects valued at $237.1 billion for June 2025. Of these, $125.1 billion has confirmed funding,” Mr Cook said.
“We forecast that lower interest rates will support a modest lift in infrastructure construction over the coming years.”
Economic development and trends
Capacity pressures in construction continue to ease overall, but the resilience of the infrastructure pipeline is helping maintain civil cost pressures.
Bitumen price fluctuations are another factor influencing costs. Bitumen is a key input in roading projects, and recent price rises are expected to put upward pressure on materials costs in this part of the sector.
Building costs outlook
Mr Cook concluded: “RLB forecasts annual civil construction cost inflation will trough at 1 per cent around the middle of next year. Beyond that, we expect civil construction cost inflation to increase to 2.8 per cent over the longer term gradually.
Our forecast of a recovery in construction demand later in the projection, driven by lower interest rates, continues to underpin our expectations of a modest lift in civil construction cost inflation from late 2026.”
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