‘Survive till 26, thrive in 27’: NZ construction sector remains cautious
Tuesday, 9 December 2025
Construction project abandonments have increased, and that’s left the sector on tenterhooks heading into 2026, new industry figures reveal.
The latest Hubexo (formerly BCI Central) construction outlook report is out, and it shows abandoned projects rose from 1.4% in the first quarter of the year to 3.9% in the third.
That’s up from 1.5% at the same time last year, but still an improvement on the 5.6% of projects that were abandoned in the third quarter of 2023.
Residential projects carried the heaviest load with a 7% abandonment rate, while community and public building projects recorded the lowest abandonment rate at 0.8%
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The northern region had the highest abandonment rates, but the upward trend was consistent nationwide.
At the same time, project deferrals have crept up to converge at about 1.4% across the northern, central and southern regions, which suggested more even conditions nationwide, according to the report.
Challenges in delivery phase
Ashleigh Porter, who is Hubexo’s Asia-Pacific president, said there was a slight increase in projects entering the pipeline heading into 2026, but it was not the most optimistic outlook.
“Yes, there’s been an uptick in project approvals, but let's see whether these works actually come to fruition. It really comes back down to the challenges we're experiencing in the delivery phase.”
There were different challenges in different areas of the project pipeline, but the number one challenge cited by developers, architects and builders was getting those approvals through, she said.
“That’s been a major hindrance across the New Zealand landscape. Documentation around compliance has caused a backlog, and the Government's reforms will take time to work through and find their footing.
“We're not looking at New Zealand going into a boom year next year, instead it looks like it will be a year of reform and alignment.”
The sector had weathered a huge storm over the past few years, and the aftershocks of cost escalation, funding constraints and workforce shortages had forced a hard reset, she said.
It meant the focus for those in the sector was now on how to get alignment between policy and finance and to execute delivery well across the market.
Economic conditions remained delicate, finance was tight and demand uneven, Porter said.
“But indicators suggest stabilisation rather than another downturn. Recovery is beginning to take shape, even if momentum is still fragile.”
Work coming on stream
Project commencements are forecast to trend upward between the last quarter of this year and the third quarter of 2026, according to the report.
The increase would be led by residential projects, which made up nearly half (48%) of all project-starts for the period. Energy, industry and infrastructure work would be the secondary driver of momentum.
About 55% of the value of national construction commencements over the period would be in the northern region.
Porter said work was coming back on stream, but it was not necessarily new work, some was work that had been deferred.
It was unlikely to lead to a big acceleration in the market, and those in the industry would also be facing some of the same challenges from over the past year, she said.
“But hopefully they can be managed with a more refined lens, and with that reformation and recalibration across 2026 we can set up a great foundation to start seeing some growth in 2027.
“That’s where we are in Australia now, and the New Zealand results give me flashbacks to Australia one or two years ago. There are similar challenges, but Australia was hit with them earlier, and now it's getting off the ground.”
If there were some steadier interest and inflation rates next year, hopefully that would lead to work picking up again with confidence returning to the market, she said.
Cautious market sentiment
Sentiment across developers, architects and builders was also surveyed in the report, and the result could be best described as cautious.
Generation Homes chief executive Craig Hopkins said last year’s mantra across the industry was “survive until 25”, and now it had simply become “survive until 26, thrive in 27”.
“The target keeps moving, and the uncertainty is the hardest part. Nobody can say with confidence when the bounce-back will come.”
Wolfbrook Residential director Guy Randall said sales were slower, margins were tighter, and developments took longer to move but they still sold.
“Our job is to match releases to demand and keep the run rate aligned. As long as we stay disciplined, we can ride out the cycles.
“But a lot of smaller ‘mum and dad’ developers have stopped. They can’t get the sales or the finance, and that capacity has fallen out of the market.”
Foster Develop director Leonard Gardner said the real commercial risk heading into 2026 lay in cost movements.
“Pricing is currently tight due to oversupply and weak demand, but capacity has left the industry.
“It won’t take much additional demand to expose those constraints, with sharp upward pressure on prices the likely result.”