Canterbury Leads Turnaround in New Zealand Construction Sector

New Zealand's construction sector is showing signs of life after enduring a near five-year downtrend. Residential construction volumes have contracted by a quarter over this period, but recent data suggests a turnaround may be underway.

The sector made one of the strongest contributions to second-quarter GDP growth, with a 4.4 percent quarterly increase in residential activity marking the best since 2021. Canterbury topped the regional breakdown, and while some uncertainty remains, forecasts suggest this trend may continue.

However, there are still challenges facing the sector. Rising interest rates, falling house prices, and population growth all weigh on the economics of building, making it less attractive to investors. Additionally, construction cost inflation has started to lift again, which could further exacerbate these issues.