The building and construction industry in New Zealand is facing a significant downturn, with a shrinking number of companies and a lack of confidence among participants. This industry, once a key driver of economic growth, is now struggling to recover from a prolonged bust phase. The latest data reveals a concerning trend: a steady decline in the number of construction firms, with 551 fewer companies in business at the end of 2025 compared to the previous year. This downturn is particularly evident in the housing market, where houses and flats sit on the market for extended periods, leading to a decrease in demand for builders and construction firms. The situation is further exacerbated by rising interest rates, weak business and consumer confidence, and a sluggish housing market. These factors have contributed to a significant number of liquidations, with many firms unable to manage their debt effectively.
The outlook for the industry remains uncertain, with a lack of long-term commitment from the government and a national infrastructure strategy that is yet to be fully realized. The war in Iran has also played a role in halting projects and causing job losses. Certified Builders chief executive Malcolm Fleming highlights the devastating impact of this uncertainty, noting that projects designed and consented by the previous government were axed after the last election, resulting in approximately 15,000 job losses. This has had a ripple effect, affecting the future pipeline of skilled workers, as the industry is at a low point in the cycle.
The labour market is also experiencing a boom-bust cycle, with a significant decline in construction jobs in 2024. However, a turnaround began in November 2025, followed by a 35% increase in construction jobs in the 12 months ended March 2026. Despite this improvement, the job ads data is at odds with the construction activity data, indicating a need for a more comprehensive approach to understanding the industry's health. The total construction activity fell by 7.8% in 2024 and another 4.1% in 2025, with the building work component weakening more sharply.
The cost of materials and rising fuel costs continue to be a significant issue for the industry. Fletcher Building, a distribution and retail business, noted that macro uncertainty and broader cost inflation are leading to delays and cancellations of new projects, particularly in the commercial sector. This trend is likely to have a negative impact on the group's performance in the first half of FY27. The industry's optimism is still lacking, with participants waiting for a moment to kick-start economic growth.
In conclusion, the building and construction industry in New Zealand is facing a challenging period, with a shrinking number of companies, a lack of confidence, and rising costs. The industry's recovery is uncertain, and a more comprehensive approach is needed to address the underlying issues and support economic growth.
