Two major bank economists flag a resilient upswing advisers can't ignore
New Zealand's construction sector delivered its strongest quarter in a year, with total building work rising 4.8% in the June quarter — comfortably beating market expectations and surprising the country's major bank economists to the upside.
According to Westpac, the bank had forecast growth of just 1%, while ASB had pencilled in a modest 0.3% gain; the broader market consensus sat at 1%.
Residential building volumes climbed 4.8%, more than reversing the 1.5% decline recorded in the March quarter, while non-residential activity rose 3.3% — its first increase since 2023.
Westpac senior economist Satish Ranchhod said the result marked a turning point after a difficult stretch for the sector.
"Total building activity rose almost 5% over the June quarter. That was the first rise in total building activity in a year," Ranchhod said.
Looking beneath the headline number, he noted residential activity "has found a base and early signs of an upswing are forming."
That regional and residential strength wasn't confined to the main centres either.
Building values rose across the country, with Auckland up 4.8% and Wellington up 1.8%, while rural regions posted even sharper gains — Waikato climbed 10.4% and Canterbury surged 11.4%. Residential construction consents have also been running hot, up 21% over the past year, pointing to a construction pipeline that should extend the upswing into 2027.
ASB economist Wesley Tanuvasa struck a similarly matter-of-fact tone, noting the resilience came "despite the sharp surge in fuel prices and elevated global and domestic economic uncertainty during Q2."
Both banks pointed to changing household formation — including a shift toward smaller townhouses — and government moves to fast-track consenting as factors supporting the steadier pipeline, alongside structural changes ASB flagged as the subject of forthcoming research.
Risks to the outlook remain, despite the rebound
Neither bank is calling an unambiguous recovery.
Ranchhod cautioned that Westpac remains "downbeat regarding the near-term outlook for commercial construction," citing sluggish economic conditions and continued caution from developers over major capital spending.
ASB struck a similar note on residential momentum, warning that "elevated build costs and a tepid housing market remain headwinds," while flagging the Middle East conflict as a fresh source of cost pressure likely to complicate the outlook over the next six months.
Both economists also flagged upside risk to their GDP forecasts. ASB lifted its Q2 construction GDP estimate to 3.6%, from a previous forecast of -2%. Both banks currently forecast an overall -0.1% GDP contraction for the quarter, though each flags upside risk to that call.
Full GDP figures are due on 17 September, with both banks set to publish updated previews in the interim.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
