Rising building costs have led the annual decline in residential construction to accelerate by 7.7% – with Wellington leading the slump at 15%.
Non-residential construction is also struggling, with the volume of work falling by 5.9% in the last quarter.
Construction costs are a major driver of inflation, and the price of building is skyrocketing.
Ockham Residential chief executive William Deihl said things seemed to be slowing down a lot.
“We’ve been struggling the past couple of years with our presales, the nervousness around projects actually starting is part of it and then interest rates are making it hard for people to actually purchase in this market.”
Presales are predicted to fall to their lowest levels in 10 years.
“Presales were about 400 a quarter during 2020 and 2021, but since that peak, they've come right back, and now they are about 50 per quarter,” said CBRE associate director Tamba Carleton.
Developers of projects big and small are facing similar challenges. Some projects have been stopped before work even starts, while others have gone into liquidation before apartments are sold.
Carleton said a lot of developments are not feasible as interest rates and debt costs increase.
Ministry of Business figures show that there have been 393 construction company failures this year, compared to 325 last year.
Although liquidations are on the rise, the overall number of companies is also continuing to grow as they battle the boom-bust cycle.
“When you need profit management on a development, if you're not going to achieve that, you're not going to develop, and that's why we're seeing supply drop from 2025 onwards.”
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