Two data sets published in early 2025 paint a challenging picture for New Zealand’s construction sector. Stats NZ reported that in the year ending January 2025, 33,812 new homes were consented — a 7.2% decrease on the previous year. At the same time, QV CostBuilder’s latest figures showed building costs have increased by an average of 44% over the past four years.
Fewer homes being consented, at significantly higher cost to build: this is the environment the industry is navigating.
The Consent Picture
The annual decline continues a trend that began after the 2022 peak of approximately 51,000 consents. Monthly data shows some recovery — in January 2025, 2,203 new homes were consented, up 11% on January 2024. Stand-alone houses were up 20% month-on-month, while multi-unit homes rose 3.1%.
The non-residential sector is also contracting. The annual value of non-residential building work consented was $8.9 billion — down 9.7% from the year ended January 2024. Commercial, industrial, and civic projects are all feeling the effects of higher interest rates and tighter public and private budgets.
The Cost Escalation Problem
A 44% increase in building costs over four years is extraordinary by any historical standard. The drivers — labour cost increases, materials price inflation, supply chain disruption, and the higher margins contractors need to remain viable in a tighter market — are not going away quickly.
For homeowners and developers, this means project budgets set even two or three years ago are likely to be significantly understated. For builders, it means every new quote needs to reflect current costs, not historical assumptions — and that fixed-price contracts covering multi-year programmes carry real risk.
Finding the Floor
The question the industry is trying to answer is whether 2025 represents the floor of this down cycle or whether further declines are ahead. Interest rate reductions that began in late 2024 are expected to gradually release pent-up demand, but the timing of a genuine recovery is uncertain.
Builders who can maintain their pipelines through the current period — by focusing on sectors that are more resilient to housing downturns, such as commercial fit-out, infrastructure work, or renovation — will be better positioned when the residential market turns.