NZ Residential Construction Sees Quarterly Uptick, But Challenges Remain

New Zealand's residential construction sector is showing signs of improvement, but experts say it's too early to tell if this marks the beginning of a trend. According to BNZ, the sector experienced its strongest quarterly increase in activity since 2021, with a 4.4% rise in residential building.

This growth is driven by an uptick in consents and firm building intentions, which bode well for the short-term outlook. However, experts caution that the sector still faces several headwinds, including rising construction costs, interest rates, and flat property prices.

The Reserve Bank has lifted the OCR twice this year to 2.75%, with forecasts suggesting an additional 25bp increase by March. This will likely keep financing costs high, making it more challenging for builders to absorb the increasing costs of materials and labor.