Property, construction sectors didn’t get lollies in Budget 2025, but praise it anyhow

Friday, 23 May 2025

The property and construction sectors have met Budget 2025 with cautious optimism that infrastructure investment will bolster construction and ultimately lead to a more lively property market.

For Ray White chief executive Daniel Coulson, the standout feature of Thursday’s Budget announcement was the change to KiwiSaver.

While halving the government contribution to 25 cents per dollar (capped at $260.72) reduced a valuable boost first home buyers might have relied on, and the elimination of government contributions for those earning over $180,000, shifted more of the saving burden onto individuals and employers, there were upsides to it.

For aspiring homeowners, the increased default contribution rates (rising to 3.5% by 2026 and 4% by 2028) would accelerate savings growth, while extending benefits to 16-17 year olds enabled earlier saving.

“It makes things a bit more challenging in the short-term, but long-term the government is signalling they are interested in helping people into retirement or first homes via Kiwisaver,” Coulson said.

While it was a fairly trim Budget, it did have a bit in it to encourage economic growth, and there were some benefits for small businesses, he said.

“Many small business owners get deposits for this business from their family home, and there has been huge pressure on that around interest rates in recent years.

“So any relief in expenses is helpful in that space, and the 20% rebate [investment boost] announced yesterday will help.”

Drivers

The three key drivers in the property market were interest rates, which were now heading in the right direction; immigration, which was still code red; and business confidence, he said.

“A concentrated focus on growth is a big tick in terms of boosting confidence, and when that builds enough it will impact on the property market.”

New Zealand's housing market has remained flat in the past two years, with national house price hovering between $750,000 and $801,000, and most major cities showing negative price growth of 12-13 per cent over the last three years.

But it may become cheaper and more efficient for some companies to build homes and housing components thanks to accelerated depreciation on new plant and machinery.

Signature Homes chief executive Paul Bull said the investment boost would not make much of a difference to his company, but it should help its sub-contractors with new plant.

“For asset intensive industries it could be great as any depreciation would be larger and the company would pay less.”

The announcement around investment in social housing was good, he said, as building more social housing as part of the solution to the housing shortage, and it was also good for residential builders.

The transition of social housing building from Kainga Ora to community housing providers had led to a dip in sales for Signature Homes, for example.

But he said those volumes were now picking up, and more funding for social housing supported more building in that space.

Not green

There was a substantial boost to all sorts of building, with a $2.7 billion 'build our way out' strategy, including over $460+ million for rail generating immediate construction employment and long-term value appreciation in surrounding areas, the sector hoped.

The Green Building Council, however, said Budget 2025 was “not a growth budget for the green economy.

“It doesn’t contribute to economic growth in green jobs, energy efficiency, or better housing.

“Previous research from BERL found that building new homes and large offices with significantly reduced carbon emissions would contribute an additional $147 billion to New Zealand’s GDP by 2050.”

But Building Industry Federation chief executive Julien Leys said accelerated depreciation on commercial buildings should incentivise more green infrastructure in buildings too.

Meanwhile, the investment boost would help with capital expenditure on big items, such as cranes, bulldozers and technology around AI and automation, he said.

“That will encourage some people to invest in assets they might not have otherwise, and that is good for the industry as there is a fair bit of machinery around which is past its use-by date, or a bit old.

Overall it was a positive budget for the construction sector, signalling a positive change, he felt.

But more foreign investment was needed - including from big companies coming in to help with larger building and infrastructure projects, and the Budget touched on that, he said.

“It would mean more people would be employed because we would need more people back on site and on the tools. So, yes if that happens it will help encourage more growth.

“A lot of the announcements are pipeline work though, so until we see what some of these projects involve, it’s hard to say what will come from them.”

But the best way to get New Zealand out of its current economic environment was for it to build its way out, he said.

“This Budget touches on that, and if we can do that in commercial, civil and residential building it will be great.”

Fantastic

Canterbury-based construction expert Mike Blackburn said he had not yet digested what the investment boost might mean for construction in detail.

But it was fantastic to see the announcements around infrastructure funding as it provided certainty for construction in that space, he said.

“There has long been underinvestment in infrastructure, and that has inhibited development in many areas. Who knows if the money allocated is new or redirected. But the fact it is there signals it is a priority.”

With this Budget, the government was signalling to the country and its neighbours that it was serious about addressing the deficit and getting it back on track, he said.

“It might not be an ‘austerity’ Budget, but it is doing a bit to get people to face the fact that there is not much money to go around.

“There are no lollies in the lolly jar, so the Government is making the best of what is available, and giving priority to infrastructure. And that’s positive.”