Building activity rose 4.8 per cent in the June 2026 quarter, the first increase after four consecutive quarterly declines. But subdued non-residential demand, borrowing costs and economic uncertainty mean the path ahead remains cautious.
After a difficult start to 2026, New Zealand’s construction sector is showing early signs of recovery. Stats NZ building activity data shows total construction volumes increased 4.8 per cent in the June 2026 quarter, following a decline in March.
Prepared by the New Zealand Institute of Economic Research (NZIER) exclusively for RLB, Forecast 117 – New Zealand Trends in Property and Construction finds growth across both parts of the market, with residential activity up 4.8 per cent and non-residential activity up 3.3 per cent over the quarter. RLB Director Grant Watkins commented:
“New Zealand’s construction sector is showing early signs of recovery, with building activity rebounding in the June 2026 quarter after a period of weakness. However, the recovery remains uneven, with subdued non-residential demand, elevated borrowing costs and ongoing economic uncertainty continuing to influence investment decisions.”
Recovery gains ground across regions
The improvement was spread across several regions. Auckland continues to account for the largest share of construction activity, while Waikato, Wellington and Canterbury also recorded stronger activity during the quarter.
Forward indicators, however, suggest the recovery remains fragile. Higher interest rates, weaker household confidence and uncertainty around economic conditions continue to weigh on development decisions, particularly in private-sector investment.
Residential shows clearer signs of recovery
Residential construction is leading the way, supported by a recovery in dwelling consents. A total of 40,908 new dwellings were consented in the year to July 2026, a 21 per cent increase on the previous year.
Growth has been concentrated in standalone houses and medium-density housing, while apartment consents remain volatile. The report notes that higher borrowing costs and a more restrictive credit environment are likely to continue limiting large-scale residential developments.
Population growth is expected to support housing demand over the longer term, although the pace of recovery will vary between regions depending on economic and income conditions.
Non-residential construction remains under pressure
Non-residential demand has yet to follow. The value of non-residential building work consented in the year to July 2026 was $8.8 billion, down 2.5 per cent on the previous year.
Weakness has been most evident in healthcare facilities and industrial buildings, while office construction remains subdued, although refurbishment and alterations work is providing some support for the office sector.
Regional differences remain significant. Auckland continues to be the largest non-residential market, while Wellington faces additional pressure from reduced government-related activity and weaker employment conditions.
Infrastructure provides a positive foundation
Infrastructure remains a key source of future work. The New Zealand Infrastructure Commission’s June 2026 Pipeline update recorded a total pipeline value of $290 billion, including increases in fully funded initiatives and projects with committed funding sources.
Transport is the largest component of the forward programme, with water also a significant area of investment. However, infrastructure growth is expected to provide greater support for civil contractors than for vertical construction markets.
Where building costs are heading
RLB forecasts annual non-residential construction cost inflation to increase to around 2.8 per cent in the September quarter and remain close to 3 per cent over 2027, before gradually lifting to around 3.3 to 3.4 per cent over the longer term.
These forecasts assume inflation expectations remain anchored and that the earlier fuel price shock does not generate persistent second-round inflation effects.
“While easing global crude oil prices have reduced some immediate cost pressures, uncertainty around international events and the upcoming New Zealand general election may encourage businesses to delay major spending decisions.”
The outlook
Forecast 117 points to a recovery that is real but not yet secure. As Grant concluded:
“RLB’s outlook is for a construction recovery that continues to strengthen but remains constrained by higher borrowing costs, investment caution and global uncertainty.”
For anyone planning developments, managing procurement or advising clients, understanding where that recovery is strongest, and where it is still stalling, will be essential over the months ahead.
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