Building activity falls in March

The volume of building work fell sharply in the March 2020 quarter, following a smaller fall in the December 2019 quarter, Stats NZ said today.

“Overall building activity fell 5.7 percent in the March 2020 quarter, partly due to the COVID-19 level 4 lockdown,” acting building statistics manager Dave Adair said.

“This followed a 0.9 percent fall in the December 2019 quarter.”

The March 2020 quarter fall accounts for typical seasonal patterns and higher construction costs and is a provisional estimate that may be revised when the June 2020 quarter is published on 4 September 2020.

Within total building volume, residential building volume fell 5.8 percent this quarter, and non-residential fell 5.6 percent.

The COVID-19 lockdown was announced on Monday 23 March and came into effect at 11:59pm on Wednesday 25 March 2020. This meant that at least four working days were lost from the end of the month, with activity likely to have eased in the days leading up to the lockdown.

“Building activity has been generally growing for about eight years, initially driven by the Canterbury earthquake rebuild, then by developments in Auckland,” Mr Adair said.

“The level of activity has flattened in recent quarters, after running at historically high levels for about four years.”

We adjusted both the modelled and survey components of the March 2020 quarter building activity estimate to account for the effect of COVID-19.

See COVID-19 lockdown and value of building work put in place for March 2020 quarter, released on 3 June 2020, for more information.

Construction industry sentiment negative since lockdown

All March 2020 quarter building activity survey respondents were asked to note any factors that might influence their building projects, including COVID-19 and the lockdown.

“Although we were collecting data on March quarter construction, some respondents told us how they felt about their projects at the time of responding to the survey and going forward,” Mr Adair said.

“This gives us some insight into their experiences to date and some expectations for the June quarter and beyond. We can expect the lockdown to have a more significant impact on the June 2020 quarter as virtually all construction work stopped until at least 28 April with the move to level 3 restrictions.”

Almost all survey respondents that included a comment said that a delay was the most likely factor to influence their projects. Other factors of concern to respondents included:

• financial problems (20 percent)
• limited availability of supplies (5 percent)
• reduced productivity (less than 5 percent)
• limited availability of workers (less than 5 percent)
• reduced market confidence (less than 5 percent).

These factors are not inherently independent, and some respondents noted that a range of factors would impact the financial stability of their projects. Moreover, many respondents were still uncertain as to the true implications of COVID-19, but it was clear that most are anticipating some negative implications.

“In the end, many respondents are unsure as to how successful their building projects will be since it all depends on the currently unknown future health of supply chains, the labour force, and various markets,” Mr Adair said.

These insights were collected from 1,110 responses that explicitly provided a statement around COVID-19 and its actual and/or expected negative implications.

COVID-19 Alert System timeline

23 March 2020: New Zealand enters COVID-19 alert level 3 (Restrict)

25 March 2020: New Zealand enters COVID-19 alert level 4 (Eliminate)

27 April 2020: New Zealand enters COVID-19 alert level 3 (Restrict)