By the numbers: ‘Brutal’ construction slump starts to turn

Tuesday, 19 August 2025

Building activity has slowed, but there are signs of momentum returning to the sector, the NZ Chinese Building Industry Association says.

The construction industry’s revenue dropped by $5 billion this year, but the downturn looks to have hit the bottom - although a new challenge is looming for the sector.

That’s according to the New Zealand Chinese Building Industry Association’s second annual construction sector report, launched at an event at Parliament on Tuesday.

It found that residential building consents had levelled off, government infrastructure projects were restarting, and falling interest rates were supporting a cautious lift in mortgage activity.

The association’s president, Frank Xu, said the sector had continued to face real challenges.

“Activity has slowed, some businesses have stepped back, and uncertainty has tested our resilience,” he said. “Yet these cycles are not new to us, they are part of the rhythm of construction.

The NZ Chinese Building Industry Association has a special focus on the workforce, says president Frank Xu.

“Behind the numbers, there are real signs of momentum returning. After some very difficult years, we are seeing the green shoots of much-needed recovery.”

But the report also had a special focus on the workforce behind the sector’s future, and the need to invest in people to service an expected uplift in construction activity, he said.

Here’s what the report’s numbers tell us about where the construction industry is in the current cycle, and the challenges that lie ahead.

$94 billion

That’s the revenue generated by the construction sector in 2025, down from $99 billion the year prior.

The decline reflected the broader economic slowdown that had affected construction workers, business owners, and suppliers, the report said.

“But the sector is a literal nation builder, essential to New Zealand’s economic resilience and social wellbeing, and a big part of the economy.”

It remained a major employer, with 281,000 people directly employed and a further 247,000 supported through supplier networks, together accounting for 18% of jobs.

48%

The number of construction businesses fell to 81,000 in 2025, from 81,900 in 2024.

Construction activity had slowed to the lowest level since 2019, and alongside that company liquidations had increased by 48%, while credit defaults rose by 14% from 2024.

Employment in the sector had fallen from over 300,000 in 2023, with 16,000 jobs lost in the current cycle.

81,000

But those figures painted an overly gloomy picture, and the sector was stabilising, according to the report.

That was because despite an increase in financial stress and business closures, the total number of construction businesses only fell by around 900 to 81,000, from 81,900 in 2024.

Report author and economist Shamubeel Eaqub said he did not want to sugar-coat the situation as the downturn had been “absolutely brutal”, but the cycle was slowly starting to turn.

20%

The current cyclical low was still 20% higher than the peak before the Global Financial Crisis in 2008, he said.

“This shows that, while the sector is subject to cycles, the structural trend is actually one of growth, and the sector is now bigger and more diverse than ever before.”

But the sector’s fall had been sharp, it had not bounced back as quickly as hoped, and the metrics were now patchy and stuttering, as often happened in the early part of a recovery, he said.

Stalled immigration is a headwind for the construction industry, report author Shamubeel Eaqub says.

47

House building had been too slow relative to New Zealand’s growing population in 47 of the last 50 years, the report found.

It had contributed to the country’s chronic shortage of housing, but Eaqub said that it would eventually support the recovery.

“There is one big headwind, and that is immigration, which has stalled. Demand needs to come together with other factors, such as lower interest rates, to sustain house building.”

But there were 9800 consented homes in Auckland alone awaiting development, and that backlog of delayed or postponed projects was likely to drive renewed activity when market conditions improved.

$210 billion

That’s the size of the country’s infrastructure deficit, and much greater investment in public infrastructure was required to recover the deficit, and respond to future needs.

There was a growing political consensus that more investment was needed, and more evenly over time, according to the report.

While this was positive and would support construction, the problem was there was not necessarily a solid plan to deal with it in place, Eaqub said.

The Government is changing the rules around who pays for faulty construction, and how councils issue building consents, in what it's calling the biggest building reform in a generation. Lloyd Burr reports.

“The Government’s pause in infrastructure work was painful for the sector, and now projects are restarting money will start to flow through again, which is good.

“We can’t be overly confident though, as the pipeline is a bit skinny. There’s quite a bit over the next 12 months, but less in each of the two following years.”

1985

Construction industry productivity had not improved in recent years, and remained similar to levels from 40 years ago.

Xu said while personal productivity had increased, the industry was heavily regulated, and that impacted on productivity overall.

“The Government’s recent moves to shake up consenting regulations and increase the amount of building products available will help with productivity. As will greater use of prefabrication, and automation of equipment.”

But he echoed the report’s recommendations around the need to invest more in training across the board, from apprentices to management, to improve retention, and for businesses to focus on their people.

37%

Staff turnover within building firms that have apprentices stabilises, the BCITO’s Greg Durkin says.

The percentage of workers in the sector that have been in their job for less than a year.

Half of new hires left by the end of year two, while just 6% of workers remained in the same job after five years.

Retention remained a significant issue, and the report said high turnover increased recruitment and training costs and undermined productivity gains.

Xu said the sector needed to invest in people now, before the next wave of activity began. “Training isn’t just a cost - it’s a competitive advantage. The smartest firms are planning ahead.”

One third

Training was essential as only one third of new hires came with relevant qualifications.

86% of trained workers received above-average wage increases, compared to 31% of untrained workers.

At the same time, the number of people enrolling in construction-related vocational training has slowed, and that posed a risk to future labour supply.

Building and Construction Industry Training Organisation director Greg Durkin said apprentice training was linked to economic activity in the sector, so it was not surprising numbers were lower.

But the report highlighted the high churn of workers, and evidence showed one of the advantages of apprentices was that turnover within businesses that had them stabilised, he said.

“Employers in the sector tend to be small or medium businesses, so when employers build a strong relationship with their workers through an apprenticeship it builds loyalty.”

Apprentices were still being signed up, and the firms doing that were building capability for when the green shoots showing started to sprout into branches, he said.

8%

High turnover also led to high injury rates, and the percentage of working days lost to injuries was 8% - roughly twice the rate for all industries.

That had serious business implications, with the injury-related lost hours alone equivalent to $2.2 billion of wages and profits per year.

Any improvement in health and safety performance would increase the capacity of the sector, Xu said.