September 08, 2021

Residential construction booming before latest lockdown

Prospects unclear for Auckland

Activity levels in the construction industry have been strong this year, but the latest COVID lockdown has cast a shadow.

After a significant slump in 2020, as a result of COVID-19 and the strict lockdown protocols which were enforced, the construction industry has been performing strongly in 2021. However, the latest COVID-19 outbreak could have a dampening impact on the industry, especially in Auckland.

The value of building consents is up 44 percent since January.

In July 2021, the total value of new building consents issued on residential and non-residential buildings in New Zealand was just over $2.5 billion. This represented a significant 44 percent increase from January 2021.

Looking back, when New Zealand was placed into lockdown in March 2020, construction industry activity slowed dramatically, and the value of all new building consents issued dropped to under $1.3 billion in April. This was a result of the significant drop in residential building consents issued, as depicted in the graph above.

Since then, the total value of new building consents issued has increased significantly, driven mostly by the increasing demand for, and value of, residential buildings. The value of new residential building consents issued increased by just under $400 million, or 25 percent, between July 2020 and July 2021. By contrast, the value of non-residential building consents issued has stayed relatively consistent, fluctuating around $600 million since June 2020.

The number of new dwellings consented reaching highs across New Zealand.

The seasonally adjusted number of new dwellings consented totalled 4,207 in July 2021 which is a significant increase from 3,209 in July 2020. However, we could see this number drop once again in the coming months as Auckland, which has accounted for 42 percent of all new dwellings in 2021, remains in level 4 lockdown.

Total value of work put in place now exceeding pre-COVID-19 levels.

The below graph reflects the significant decrease in the total value of residential and non-residential work put in place in June 2020 throughout New Zealand, with Auckland experiencing a decrease of more than $400 million during that month.

With each regional economy opening up as lockdown restrictions were lifted, the total value of work put in place in New Zealand bounced back quickly, reaching a total of $6.5 billion in September 2020.

The total value of residential and non-residential work put in place across New Zealand had been consistently increasing since September 2020 and looked to continue this way. However, with the most recent COVID-19 outbreak, this consistent growth may hit a wall and we could see another slump similar to the one in 2020. Although the length of the lockdown period in 2021 has been shorter than in 2020 for most of New Zealand, Auckland, which accounted for 38 percent of the total value of work put in place in June 2021, remains in lockdown.

This may have a significant impact on the total value of work put in place, but not to the same extent as in 2020 because most of New Zealand can now return to work.