New Zealand’s construction recovery has stalled as higher fuel costs, geopolitical uncertainty and weaker business confidence combine to slow activity across the sector.
The construction sector entered 2026 expecting a gradual recovery. Instead, renewed global uncertainty and persistent domestic pressures have created a more cautious environment for developers, investors and contractors.
Prepared by the New Zealand Institute of Economic Research (NZIER) exclusively for RLB, Forecast 116 – New Zealand Trends in Property and Construction highlights a sector navigating competing forces. While infrastructure investment and residential demand continue to provide support, activity remains uneven and confidence has softened.
Construction activity declined for a fourth consecutive quarter in early 2026, with residential work falling by an estimated 2.2 per cent and non-residential activity declining by 4 per cent over the March quarter.
New Zealand’s construction sector is experiencing a fragile and uneven recovery, with fresh headwinds from global geopolitical tensions, rising fuel prices, supply chain disruption and tightening monetary conditions undermining activity across residential and non-residential markets.
Global uncertainty reshapes the outlook
The report notes that escalating geopolitical tensions in the Middle East have driven higher fuel prices and increased supply chain uncertainty, adding further pressure to an industry facing subdued demand.
Businesses are becoming more cautious, with some projects being delayed or scaled back while investors assess the evolving economic outlook.
Pipeline remains uneven
Although dwelling consents increased by more than 16 per cent compared with a year earlier, much of that growth has been concentrated in Auckland and apartment developments rather than representing broad-based market strength.
Medium-density housing continues to underpin residential demand, supported by urbanisation and population growth. However, higher borrowing costs are expected to slow the pace of recovery over coming months.
Regional performance varies
The recovery remains highly regional.
Auckland continues to account for the largest share of construction activity, while Wellington has experienced one of the sharpest declines as public sector investment and commercial office demand have weakened.
Southland has demonstrated greater resilience, supported by stronger agricultural conditions, while non-residential construction has softened across much of the country, particularly in Wellington, Canterbury and Otago.
Infrastructure provides stability
Large infrastructure projects continue to provide an important source of activity, helping offset weakness across other sectors.
However, RLB expects higher borrowing costs and ongoing uncertainty to weigh on residential development and private sector investment throughout 2026.
While infrastructure investment continues to provide important support, the outlook for New Zealand’s construction sector remains highly dependent on global economic conditions, interest rates and business confidence. Forecast 116 suggests New Zealand’s construction recovery will continue, but its pace is likely to remain uneven as global and domestic pressures persist.
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