Construction activity lifts as new home consents rise

Wednesday, 14 January 2026

New home consents are rising showing early momentum for the sector after more than two years of subdued conditions.

Construction activity is beginning to lift, with a rebound in new home consents signalling early momentum for the sector after more than two years of subdued conditions.

Cotality’s Cordell Construction Cost index for the last quarter of 2025 showed residential building costs rose by 0.9% in Q4 2025, the largest quarterly increase in over a year, lifting annual growth to 2.3% - up from 2.0% in the third quarter last year.

The new figures were still well below the long-term average of 4.1%.

The number of new homes approved for construction has started to climb again, with the 12-month rolling total reaching more than 35,500 in October. The increase followed a prolonged slowdown that saw approvals fall sharply from their 2022 peak.

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Cotality’s chief property economist, Kelvin Davidson, said thatmarked a turnaround following the period of stagnation observed throughout late 2024 and the first half of 2025.

Davidson said the latest figures pointed to a gradual recovery in construction activity.

“After peaking at more than 51,000 approvals in the 12 months to May 2022, new home consents fell to a low point of around 33,500 to 34,000,” Davidson said.

“We’re now seeing a clear lift, which fits with what builders are telling us — that workloads are starting to pick up again.”

He said they were not seeing the extreme inflation experienced in the post-Covid phase, when the annual growth rate peaked at more than 10% in late 2022.

“During that period, there were supply chain issues for key materials such as plasterboard and rising wages also drove up costs significantly.”

Davidson said lower mortgage rates had helped support the recovery, along with exemptions for new builds under loan-to-value and debt-to-income lending rules, making it easier for households to finance projects or buy off the plans.

Despite the quarterly lift, cost pressures remained contained.

He said the sector was far removed from the extreme cost inflation seen in the post-Covid period, when annual growth exceeded 10%.

“While costs haven’t fallen in any meaningful way, the pace of increase has clearly moderated,” he said. “The overall cost of building remains high, but the surge we saw in 2021 and 2022 has passed.”

Looking ahead through 2026, the construction sector was expected to continue expanding, with rising activity likely to bring modest increases in costs, Davidson said.

“As the recovery becomes more established, construction cost growth could pick up again,” he said. “However, a sharp spike like the post-Covid phase remains unlikely.”

The Quarterly Survey of Business Opinion published by the New Zealand Institute of Economic Research, out on Tuesday, said business confidence had jumped sharply in the final three months of last year and a large number of firms were expecting to start hiring again in the coming months.

A net 39% of firms expected economic conditions to improve over the next six months, an increase of 17% expecting better conditions and is the most optimistic businesses have been about an improvement in conditions since 2014.