Building activity – September quarter 2025 (seasonally adjusted)

Total construction: +1.5% (previous: -2.4%), Westpac f/c: -0.4%)

Residential building work: +2.8% (previous: -3.3%), Westpac f/c: Flat

Non-residential building work: -1.3% (previous -1.1%, Westpac f/c: -1.0%

The September quarter building activity report was firmer than expected.

Total building activity rose 1.5% over the quarter – above our forecast for a modest decline.

September’s gain was a result of a 2.8% lift in residential building. That was balanced against a sharper than expected 1.3% fall in non-residential building work completed.

Residential activity

The residential building cycle looks like it has now found a floor. After falling sharply between 2022 and 2024, building levels have been tracking sideways since the start of this year. On top of that, the number of new projects being consented has started to trend higher in recent months.

The level of residential building activity remains around 25% lower than its peak in 2022. And talking to builders and developers around the country in recent months, we’re still hearing reports of tough trading conditions (especial in regions like Wellington). But we’re also hearing increased optimism about the year ahead as a result of lower interest rates. That’s seen developers starting to bring more projects to market.

Home building is likely to remain around current levels in the near term. However, with the pipeline of new projects now lifting, we expect to see residential construction turning higher over 2026. That recovery is expected to be gradual, however. Although low interest rates are supporting new development, population growth remains low and there have been sizeable increases in the housing stock over the past few years. Those factors are still weighing on house price growth and will also be a dampener on the pace of home building.

Non-residential activity

Non-residential building levels have continued to trend down, falling 1.3% over the past quarter. Some of the fall in spending has been due to public sector projects. However, weak economic activity has seen businesses winding back their capital expenditure and has also discouraged the development of new commercial space. In our recent talks with businesses, a number of those we spoke to indicated that they’re holding off on major capital expenditure for the time being due to uncertainty about the economic landscape. Consistent with that, we expect some further softness in the near term.

Implications for September quarter GDP

We’re forecasting a 0.4% rise in GDP over the September quarter (out 17 December). Today’s result was stronger than forecast and follows firmer indications for the retail sector. We’ll take a closer look at how our forecast for GDP growth is shaping up over the coming week as additional data on September quarter activity is released.

Satish Ranchhod, Senior Economist

P: +64 9 336 5668

M: +64 21 710 852

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