New Zealand's residential construction has hit a four-year low, signalling potential economic recession as higher interest rates reduce spending and investment. Construction activity declined for the seventh consecutive quarter, with overall building falling 0.2% in the second quarter of 2023. Rising costs of materials and finance have deterred buyers and developers, resulting in a 22% drop in home-building approvals over the past year. Fletcher Building, the nation's largest supplier of construction materials, anticipates a further 10% decline in volumes by June 2025. Economists expect a second-quarter GDP contraction, with official data due on 19 Sept.
New Zealand's housing construction dropped to its lowest point in four years last quarter, indicating a potential entry into another recession. Spending in constant prices, a measure of volume, declined to NZD 5.2 billion (USD 3 billion) in the three months ending June, according to Statistics New Zealand in Wellington. This marks the lowest level since mid-2020, when the country was under pandemic lockdown. Economists widely predict that the economy shrank in the second quarter due to increased interest rates limiting spending and investment. The Reserve Bank, which recently began easing measures, anticipates further contraction in the third quarter, potentially leading to the nation's third recession in recent times.
The report revealed that residential construction declined for the seventh straight quarter, dropping 0.7% compared to the first quarter of the year. Overall building activity, which includes non-residential projects, fell by 0.2%. The statistics bureau will release second-quarter GDP data on 19 Sept. Other recent reports suggest declines in exports and retail sales, further fuelling expectations of an economic contraction.
Rising material and financing costs have impacted construction activity, leading buyers and developers to hold back. Home-building approvals in the 12 months leading up to July were 22% lower than in the same period the previous years. Confidence in the construction industry remains low. Fletcher Building, New Zealand's largest supplier of wallboard, timber, and other construction materials, stated last month that demand in its materials and distribution sector is under strain and is expected to decline by at least another 10% by June 2025.
New Zealand's housing construction has hit a four-year low, signalling a potential recession as spending dropped to NZD 5.2 billion in the last quarter. With residential construction declining for the seventh consecutive quarter and overall building activity also falling, the economy is predicted to have contracted in the second quarter. Rising material and financing costs, coupled with decreased home-building approvals and low industry confidence, further exacerbate the economic downturn. The Reserve Bank anticipates continued contraction, possibly leading to the nation's third recession in recent times.
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