Robust Construction Activity Expected to Continue in NZ
The National Construction Pipeline Report 2019 has recently been released and provides a forward view of national building and construction activity over the next six years, to the end of 2024.
What’s the outlook for construction activity over the next few years?
The overall headline is positive, with building volumes forecast to continue to grow at over $40 billion per year. Activity is expected to peak at $43 billion in 2021, with that year expected to see in the region of $26 billion of residential construction, $9 billion of non-residential building and about $8 billion of infrastructure activity.
On the residential side, more than $40 billion of total new work is included in the pipeline, with 224,500 new dwellings expected to be built over the next six years, an average of more than 37,000 a year.
Residential construction is expected to peak in 2020, with the peak of non-residential activity forecast for 2021.
How could this impact your construction sector business?
We’ve recently discussed the impact of the skills shortage on the NZ building industry, with many construction firms struggling to find and maintain the right staff to meet building demand.
This has resulted in upward pressure on salaries and contract rates – bad news for the already squeezed margins of building firms.
Whilst activity will continue to be robust over the next year or two – with volumes peaking in 2020 and 2021 in residential and non-residential respectively – a Westpac analysis points out that after ramping up labour forces, firms may not have to continue to do the same on an ongoing basis.
Which may provide something of a cap in the medium term on how much further wages may have to rise.
At Bonded NZ, we know how important it is to manage risk for your construction business in order to navigate the ups and downs of the market.
As specialist insurance brokers, we can advise on the best construction insurance options for your business. So get in touch today for impartial, expert advice.