Building and Construction Sector Trends Biannual Snapshot: May 2022
1
This Snapshot covers material from October 2021 to March 2022.

AN OVERVIEW OF THE BUILDING AND CONSTRUCTION SECTOR
Construction costs continue to rise

Construction sector continues to recover from the pandemic•

The continued high demand for residential building activity has put the sector in good stead torecover from the impacts of the COVID-19 pandemic. There was a record number of annual new
dwelling consents, with 49,773 new dwellings consented for the February 2022 year. This was 25
per cent more dwellings consented than in the February 2021 year.

•

Construction businesses have been experiencing higher demand for building activity, continuing
supply-chain issues, and higher labour costs which are pushing up the costs of building activity.

•

Record high new dwelling consents issued and the demand for residential building activity are contributing
to the rise in construction costs and may further impact the residential market.

•

The volume of building work put in place for all buildings in the December 2021 year grew 10.1 per
cent, compared to December 2020 year, with the volume of residential building activity lifting tohistorically high levels at $8.1 billion.

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In addition, the EBOSS Quarter 1 2022 Construction Supply Chain Report reported that 78 per cent of
suppliers were having issues supplying the market, with 80 per cent of suppliers stating that freight was a
key issue impacting business’ ability to supply goods in February 2022.

•

The sector’s contribution to GDP rose 8.7 per cent in the December 2021 quarter, making it thesecond fastest growing industry. It also contributed 0.6 percentage points to the overall 3.0 per centnational GDP growth.

•

According to the latest Stats NZ Consumer Price Index, prices for the construction of new dwellings increased
18 per cent in the March 2022 quarter (compared to the March 2021 quarter). It was the largest increase
recorded since the series began in 1985.

•

Forecasts in the National Construction Pipeline Report 2021 estimated an increase in building andconstruction activity through to the end of the forecast period in 2026.

•

This was echoed by the NZIER’s Business Opinion Survey in December 2021, in which a net 92 per cent ofbuilding sector firms reported an increase in costs, and feelings of pessimism as cost pressures continue tointensify.

•

Wage inflation for the construction sector rose 0.9 per cent in the December 2021 quarter (compared to the
September 2021 quarter). This increase was above the all-industry average of 0.6 percent for the same time
period. Annually, wages in the construction sector rose by 3.3 per cent.

•

The Government has recently asked the Commerce Commission to undertake a study into competition in New
Zealand’s residential building supply market. This study will focus on factors that may be affecting
competition for the supply or acquisition of key building supplies used to build the major components ofresidential buildings.

Strong demand and growth in the construction workforce•

The construction sector is the fourth largest employer, with 292,800 people employed in New
Zealand in the December 2021 quarter, an increase of 5.4 per cent from the December 2020
quarter.

•

It provided 13,255 more jobs in March 2022 (compared to March 2021) - this is likely to be driven
by the high demand for housing, with more people wanting to build or renovate their homes.

•

There is a significant pipeline of apprentices currently training in the construction sector. In July 2021,
the Building and Construction Industry Training Organisation (BCITO) announced a record level of
20,000 apprentices in training, with more than 6,500 apprentices signed up in 2021 alone.

•

However, many construction businesses have experienced recruiting difficulty in 2021. According to
Stats NZ’s Business Operations Survey 2021, around 90 per cent of construction businesses reported
that they experienced moderate to severe difficulty when recruiting tradespersons.

NOT GOVERNMENT POLICYBuilding and Construction Sector Trends Biannual Snapshot: May 2022
Construction Sector Trends March Bi Annual Snapshot

This Snapshot covers material from October 2021 to March 2022.

PERFORMANCE
Economic Performance•

There was a 3.0 per cent rise in GDP in the December 2021 quarter. This could be reflective of the gradualloosening of the COVID-19 Alert Level 4 restrictions experienced in the September 2021 quarter, as well aschanges in the COVID-19 Protection Framework (traffic lights) during the December 2021 quarter.

•

Economic activity in the construction sector rose 8.7 per cent in the December 2021 quarter, compared to
the September 2021 quarter. Strong growth was observed in construction services and in heavy and civilengineering.

•

The sector saw the largest sale value percentage increase compared to other industries in the December
2021 quarter. It was up $3.0 billion (16 per cent) from the September 2021 quarter and reached $21 billion.
This was the second largest quarterly increase since the September 2020 quarter.

Building Consents and Activity•

A record 49,773 new homes were consented in the year ended February 2022, an increase of 25 per centon the year ended December 2021. The annual number of new homes consents issued were record-high foreleven months between March 2011 and February 2022.

•

The upward trend for townhouse, flats, units and other dwellings continued in the December 2021
quarter. Townhouses, flats and units now make up approximately 35 per cent of all new homes consented
in the December 2021 year.

•

Total building value was $8.1 billion in the December 2021 quarter, an increase of 17 per cent from theSeptember 2021 quarter. Auckland contributed around 38 per cent of the total building value in the
December 2021 quarter.

•

Total building volume rose a seasonally adjusted 8.9 per cent in the December 2021 quarter, compared to
the September 2021 quarter. Residential building activity rose 5.2 per cent, while non-residential building
activity rose 15.8 per cent. Annually, the actual volume of building work put in place for the 2021 year was
up 10.1 per cent, when compared against 2020.

Economic Outlook•

The Rider Levett Bucknells Forecast Report, released in the fourth quarter of 2021, stated that given thelevel of increased costs, the difficulty of securing resources, and the “nervousness” of lending institutions,development work was expected to slow. However, with the significant pipeline of public works, capacity
issues were expected to continue. An increase of between 5 and 6 per cent of national construction costs
was forecasted for the 2022 calendar year.

•

The EBOSS Quarter 1 2022 Construction Supply Chain Report reported that, on average, there was a 19 percent increase in the cost of building material to suppliers between August 2021 and January 2022, and that
this was forecast to increase a further 11 per cent by July 2022.
NOT GOVERNMENT POLICY2

Building and Construction Sector Trends Biannual Snapshot: May 2022
3
This Snapshot covers material from October 2021 to March 2022.

PEOPLENew Zealand Construction Workforce•

There were 292,800 construction workers employed in the December 2021 quarter. The overall
construction workforce comprised of 250,900 male workers and 41,900 female workers.

•

Construction workers occupying filled jobs rose 7.0 per cent in March 2022 (compared to March 2021),
providing 13,225 more jobs to the sector. It was the industry with the second largest increase in filled job
numbers during that period.

•

Stats NZ’s Business Operation Survey 2021 reported that around 90 per cent of construction businesses
reported experiencing moderate to severe difficulty recruiting tradespersons and related workers(including apprentices). This was an increase from 74 per cent in the 2020 survey.

•

The strong growth in jobs over the past year is likely to be driven by the high demand for housing, withmore people wanting to build or renovate their homes.

PROCESSES
Legislation

Health & Safety•

WorkSafe reported 14 fatalities in the construction sector between November 2000 to October 2021.

•

There were 6,018 total injuries resulting in more than one week away from work, between April 2020 toApril 2021 (based on the latest data available). Over this period, March 2021 had the highest injury toll at
654 injuries. The number of injuries in April 2021 was higher than in April 2020, which could potentially be
attributed to the national COVID-19 Alert Level 4 restrictions between 25 March and 27 April 2020.

•

Research published by MATES in Construction in August 2021, which looked into the characteristics andrates of suicides in the construction industry, reported that:•

Construction workers had more than twice the risk of dying by suicide compared to the rest of theworkforce. The highest number of suicides were in Auckland followed by Christchurch.

•

The top five occupations with the highest number of suicides were:•

Builders’ labourers (10.9%)•

Technician and trades workers (7.9%)•

Painting trades workers (7.7%)•

Carpenters (7.7%)•

Electricians (6.3%).

•

The Government, with the support of National, introduced a Bill in October 2021 to increase housing supply and enable
more medium density housing. It is proposing that the Reserve Management Act (RMA) is changed to allow morehouses to be built in cities.

•

The Bill will enable the building of up to three homes of up to three storeys on most sites without the need for resource
consent. Additionally, Tier 1 councils (i.e., Auckland, Hamilton, Tauranga, Wellington and Christchurch) will be able toimplement intensification requirements under the National Policy Statement—Urban Development (NPS-UD), at least
one year earlier than the current requirement.

•

These proposed changes are intended to result in fewer resource consents being required and a simpler process thatavoids notification when a resource consent is needed.

Occupational Regulation•

By March 2022, there were 27,148 licensed building practitioners (LBPs), and 32,297 active electrical workers in New
Zealand.

•

Between January to March 2022, there were 56 complaints (made against LBPs and non-LBPs), which was more than
three times the number of complaints received between January and March 2021 (17 complaints).

•

During the same period, 27 complaints were made against registered electrical workers and non-registered electrical
workers (compared with 17 complaints last year).

NOT GOVERNMENT POLICYBuilding and Construction Sector Trends Biannual Snapshot: May 2022
4This Snapshot covers material from October 2021 to March 2022.

PRODUCTS
Construction costs•

Construction costs continued to rise. These could potentially be attributed to supply chain disruptions(leading to higher inflationary pressures), as well as the continued demand for building work (including
record-high building consents being issued).

•

According to the Master Builders Association, as approximately 70 per cent of all building products are either
imported or rely on components of imported products, the ongoing disruptions to global supply chains werelikely to increase the cost of building materials and products.

•

Regarding the continued demand for building work, the seasonally adjusted volume of work put in place forall buildings grew 8.9 per cent in the December 2021 quarter, with the volume for residential buildings
increasing by 5.2 per cent.

•While most industries observed increases in input and output prices in the December 2021 quarter, theconstruction sector made one of the largest contributions to increases in overall producer prices.
Additionally, the cost of construction-related materials increased for the December 2021 quarter. For
example, the cost of panel boards increased by 4.5 per cent.

•

Wage growth was modest in the sector, with an increase of 0.9 per cent between the September andDecember 2021 quarter (compared to the average of 0.6 per cent across all industries).

•

Corelogic’s Cordell Construction Cost Index (CCCI) reported a 0.9 per cent rise in house-building costs for the
December 2021 quarter. The annual CCCI increase was 6.1 per cent, the highest yearly growth rate since theMarch 2018 year. According to the NZIER’s Quarterly Survey of Business Opinion for the December 2021
quarter, a net 92 per cent of building sector firms reported an increase in costs, and feelings of pessimism inthe sector as cost pressures continued to intensify.

Construction and the Environment•

For the 2020/21 financial year, the New Zealand Green Building Council reported that:
•
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4,871 homes were “Homestar” certified
31 new buildings were “Greenstar” certified
50 large office buildings received the National Australian Built Environment Rating System
New Zealand (NABERSNZ) rating.

Stats NZ’s Business Operation Survey 2021 reported that the three most common reasons construction
businesses took climate change-related actions were due to: customer demand (26 per cent); public
opinion (24 per cent); and experience of the physical impacts of climate change (24 per cent). The cost (21per cent) and lack of viable technology (14 per cent) were the top two reasons which prevented construction
businesses from making changes to adapt to climate change in the past two years.

NOT GOVERNMENT POLICYBuilding and Construction Sector Trends Biannual Snapshot: May 2022
5This Snapshot covers material from October 2021 to March 2022.

FEATURE ARTICLE — Unpacking the rising costs of construction
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Introduction: In response to the COVID-19 pandemic, New Zealand’s borders closed to international
travellers and businesses experienced periods of full or partial closure in 2020 [1]. Similar decisions weremade by governments all around the world [2]. In anticipation of a global economic crisis at the beginning of
the pandemic, many international companies decided to reduce their production levels [3]. However, when
they faced the increased demand for products, due to people spending more time at home, most of them
could not produce their products at full capacity. At later stages, vast closures created further disruptions.
This backlog of orders combined with disruptions in international freight, created an international levelsupply chain issue in all products, including construction materials [3]. It affected countries differently, andalmost all industries were impacted, with the construction industry being no exception.

•

Additional factors influencing construction costs:a)Impact of the COVID-19 pandemic — Construction materials experienced various levels of price increase in recent
years. The NZBE publishes updated regional construction costs on a quarterly basis. The table below provides acomparison of the cost of selected building elements between February 2020 [10] and February 2022 [11] in Auckland(i.e., before the first national lockdown and the current situation). According to Table 1, while the rate of the priceincrease varied from item to item, it was more than 10 per cent for most building elements.
Table 1. A comparison of the cost of selected building elements between Feb 2020 and Feb 2022 in Auckland [10, 11].

However, the COVID-19 pandemic and its associated restrictions may have further exacerbated this.
According to Stats NZ, the Consumer Goods Price Index (CGPI) for residential construction was 2,338 in
December 2019. However, it increased to 2,415 (an increase of 3.3 per cent) in December 2020 and then
2,789 (an increase of 15.5 per cent) in December 2021 [6]. The average quarterly increase in the CGPI of
residential construction was 0.6 per cent in 2019, 0.7 per cent in 2020, and 4.5 per cent in 2021 [6]. This
clearly shows that the sharpest increases in construction cost occurred during 2021, which was one year
after the first national lockdown.
CoreLogic’s Cordell Construction Index (CCCI) showed that construction costs rose by 6.1 per cent over 2021
[7]. The latest CCCI data (Quarter 1 2022) reported an annual growth of 7.3 per cent and a quarterly growthof 2.4 per cent [8]. The average quarterly CGPI for non-residential buildings had also increased for factories(2.6 per cent), shops/offices (2.3 per cent), and civil construction (2.0 per cent) in 2021 [9]. The
construction costs for residential buildings in 2021 (4.5 per cent) was steeper than non-residential buildings.
In addition to the cost of labour and construction materials (contributing to the rising costs of construction),
it is worth considering the impact of other parameters that are also likely to be having an impact on
construction costs.

Cost in Feb
2020

Cost in Feb
2022

PercentagechangeConcrete 20 MPa in reinforced ground floor slabs$374/m3$424/m3+13.4%

D32mm dia. (deformed) rods (158 meters per 1000 kg)$3.70/Kg$4.21/Kg+13.8%

Timber decking (Ex 100 x 25mm hardwood)$10.5/m$12.2/m+16.2%

Insulation (Ceiling batts R 3.2)
Weatherboards, Tan Rad P pre-primed profiled, finger-jointed (Ex 150mm)$28.90/m2$215/m2$30.90/m2$243/m2+6.9%+13.0%

James Hardie fibre cement sheets (Hardies Monotek 7.5 mm sheet)$103.60/m2+10.0%

Profiled steel cladding (0.4mm Colorsteel)$62.1/m2$114.00/
m2$68.0/m2

10mm Gib. Board to walls
Timber Doors – Internal (1980 x 760 x 38mm hollow core flush door faced
both sides with paint quality hardboard including grooved frame, and a 3
coat enamelised paint system, excluding furniture)
Powder Coated Aluminium Sliding Windows (Includes double glazing withclear glass) – 1200 x 1000mm
Roofing tiles (Colortile metal tiles including supply and fixing battens androofing underlay – gable roof)
Shower Units: (Includes mixer, rose and waste) – Stainless steel 925 x 925 x
100mm$45/m2$572/ea$48/m2$672/ea+6.7%+17.5%$793/ea$932/ea+17.5%$56.2/m2$63/m2+12.1%$1300/ea$1450/ea+11.5%

Building element

Construction costs in New Zealand: The increasing costs of construction in New Zealand is a known issue. An
analysis of Stats NZ’s consent data by the New Zealand
Building Economist (NZBE) showed that the average cost
per square metre of consented residential units had
increased from $1,394 in 2010 to $2,360 in 2020, which isa 69.2 per cent increase in ten years [4]. A recent reportby the New Zealand Infrastructure Commission, Te
Waihanga, confirmed this trend. According to Te
Waihanga, “high construction price inflation isn’t just a
COVID-era phenomenon. Over the last five years, New
Zealand had the seventh-highest construction priceinflation in the OECD. Our residential construction price inflation averaged 5.2 per cent per annum from 2016
to 2021” [5].

b)

+9.5%

New Zealand-specific factors — While New Zealand construction costs have been affected by global supply chain
issues, other domestic factors may have also contributed to the rising costs of construction:• There was unprecedented demand for new builds during 2020-2022, whereby New Zealand observed historicallyhigh numbers of building consents issued during 2021. According to Stats NZ [12], a record 48,522 new homes wereconsented in the year ended November 2021. Additionally, record low home loan interest rates during 2020 and
2021 [13], and the Government’s tax incentives for investment in new builds [14], were two likely reasons for theincreased demand for new builds during 2020 and 2021.
• New Zealand also had one of the longest and most restricted border closures in the world [15]. Despite some

exceptions for construction workers during 2021 [16], international students and work visa holders were generally
unable to enter the country between March 2020 [17] and April 2022. This potentially could have had an impact on
the capacity and capability of the sector’s workforce [18].
NOT GOVERNMENT POLICYBuilding and Construction Sector Trends Biannual Snapshot: May 2022

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6This Snapshot covers material from October 2021 to March 2022.

FEATURE ARTICLE — Unpacking the rising costs of construction• Results of a survey published in July 2021 (by the Association of Consulting and Engineering New

Zealand, Civil Contractors New Zealand, New Zealand Institute of Architects, and Registered Master
Builders Association) reported that there were 3,229 vacancies across 135 firms. It also reported that 90
per cent of firms were having difficulty recruiting in New Zealand, with 66 per cent getting no domestic
applicants [19].

•What is the current situation? There are differing views regarding the “true extent” of the increases in construction
costs. For example, according to CoreLogic this was 6.1 per cent, while the Registered Master Builders Association
thought this was closer to 10 per cent [28]. During an interview with Newshub [29], the director of a building company
stated that timber prices had increased by 20 per cent, and that steel by 30 per cent in September 2021.

•

The EBOSS Quarter 1 2022 Construction Supply Chain Report reported that the average price increases to customers(between August 2021 to January 2022) had been: 20 per cent on structure, 16 per cent on enclosure, 19 per cent oninterior, 15 per cent on finish, and 15 per cent on other construction material categories [30]. Research conducted by
MBIE in 2021 found that timber products had the highest price increases in comparison to the pre-COVID-19 era [31].
Additionally, uncertainty about the availability of construction materials had also led to, and an increase in, stockpiling
activities which had put “larger businesses with deeper reserves” to better stockpile products and in a better position tosurvive [31].

•How does NZ compare with other countries? New Zealand is not alone when it comes to rises in construction costs.
According to data released by the US Census Bureau [32], construction costs in the US increased by 17.5 per centbetween 2020 and 2021— this was the highest increase seen in 50 years [33]. A similar pattern was also observed inother countries including Canada [34] and Australia [35]. A recent report by the New Zealand Infrastructure
Commission, Te Waihanga, found that New Zealand had the 10th highest construction price inflation in the OECD during2021 [5]. Among those countries, Canada had the highest (20.3 per cent) and Switzerland had the lowest (1.3 per cent)inflation rates in 2021 [5].

•What does the future hold? In these unprecedented times, and in a rapidly changing environment, it is difficult topredict the future of construction costs in New Zealand. It is plausible that some of the pandemic-related impacts, suchas supply chain issues, will remain in the long term [3, 30, 36]. The EBOSS Quarter 1 2022 Report predicted that theprice of construction materials will continue to increase for at least the next six months with an average of 11 per centin all categories [30]. The results of MBIE’s research also found that 39 per cent of construction businesses believed thatthe overall cost of products will get significantly worse in the next 12 months [31].

•While international travel restrictions to New Zealand are now easing, the COVID-19 pandemic is on-going. With selfisolation requirements for COVID-19 positive cases and their households, a significant number of New Zealanders(including construction-related and freight workers) may not be able to work at full capacity, which could have an
impact on workforce availability. Although the re-opening of New Zealand’s borders could help alleviate some of theseworkforce issues, it is noted that the sector’s workforce issues have been ongoing [37], and are likely to continue post
the COVID-19 pandemic.

•

Internationally, the war between Russia and Ukraine increased the price of oil to US$139 a barrel at one stage, which
was the highest it had been in 14 years [38]. An increase in crude oil price creates inflation in the price of goods either
directly (e.g., through the production of construction materials) or indirectly (e.g. through increased freight costs).

•

In conclusion, in the short and medium-term, the costs of construction are likely to continue to be impacted by thelonger-term impacts of the COVID-19 pandemic and the geopolitical climate.

• Workforce capacity and capability constraints created an environment whereby construction workers

were being poached and offered higher salaries/wages by competing businesses [20]. The implications of
this are increased labour cost and delays (and associated costs) for construction projects.
c)Demand for renovations — Described as the “biggest renovation boom in decades” [21], New Zealand, likeother countries, experienced an unprecedented increase in DIY projects since the outbreak of the pandemic
in 2020. Deferred maintenance projects, such as Healthy Homes standards upgrades [22, 23] may have also
contributed to this increase. The implication of this was an increased demand for construction materials andproducts.

•

According to Stats NZ’s Household Living Costs Price Index (HLPIs), while “property maintenance” had, on
average, increased by 3.3 per cent per year between December 2012 and December 2021. The increase
between Quarter 4 2020 and Quarter 4 2021 was 6.1 per cent [24].

•A similar pattern was also observed in other developed countries. For example, a survey by the Farnsworth
Group in the United Stated (US) found that:• Between 2020 and 2021, 60 to 74 per cent of households had started DIY projects in their home [25].
• Ninety per cent reported that the COVID-19 pandemic had caused them to start their DIY projects; andthat “being at home more often” and “having more spare time” were the main reasons for starting their
DIY projects [25].
•Being able to spend more time at home caused people to reconsider the space requirements of their homes[26] and the need to renovate to meet those new requirements [27].

NOT GOVERNMENT POLICYBuilding and Construction Sector Trends Biannual Snapshot: May 2022

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7This Snapshot covers material from October 2021 to March 2022.
•

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NOT GOVERNMENT POLICYBuilding and Construction Sector Trends Biannual Snapshot: May 2022
8This Snapshot covers material from October 2021 to March 2022.

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NOT GOVERNMENT POLICY