New Zealand Construction Market Report: Insight for 2025 and Beyond
As the New Zealand construction industry navigates a post-recession recovery, 2025 onwards promises a dynamic era shaped by resilience, innovation, and sustainability. Here’s a forward-looking analysis of the key trends and challenges set to define the sector’s future trajectory.________________________________________Economic and Industry LandscapeThe economic recovery is expected to gain momentum from mid-2025, supported by increased public and private sector investment. While global uncertainties persist, elevated population growth and strong demand for resilient infrastructure and housing will drive the sector forward.• GDP Growth: Anticipated rebound in late 2025, accelerating through 2026.• Inflation: Stabilizing between 2-3%, providing a more predictable cost environment.• Population Growth: Sustained growth due to immigration will fuel demand for urban housing and public infrastructure.________________________________________Key Trends Shaping the Future1. Resilience and Climate AdaptationThe need for resilient infrastructure will remain a top priority, with significant investments in flood protection, seismic strengthening, and renewable energy projects. Lessons from Cyclone Gabrielle and other natural disasters will guide future development.• 2025-2030: Infrastructure activity is projected to grow at 4-5% annually. 2. Urban TransformationDensification efforts in major cities like Auckland and Wellington will lead to increased demand for high-density residential projects. Mixed-use developments and transit-oriented construction will dominate urban areas.• Building Activity: Recovery is expected in 2025, with escalation stabilizing at 3.5-4%.• Infrastructure: Accelerated investment in transit systems and utilities.3. Sustainability as a Core DriverGreen construction practices will become standard, driven by Net Zero mandates and global sustainability trends. New materials, renewable energy integration, and energy-efficient designs will shape projects across sectors.• Costs: Green materials and technologies will initially increase project costs but deliver long-term savings.________________________________________Labour and Material CostsLabour MarketDespite ongoing immigration, the construction sector will continue to face a skills gap in specialized trades and project management. Wages are expected to stabilize as capacity increases.• 2025: Wage growth at 3%, easing from pandemic highs.• 2026-2030: Incremental increases aligned with activity levels. Material CostsWhile material cost pressures are easing, global energy prices and supply chain dynamics will still influence costs. The shift toward sustainable materials will add new complexities.• 2025: Materials escalation at 2-2.5%.• Beyond 2026: Costs will rise gradually as the industry transitions to greener practices.________________________________________Regional SpotlightAuckland• Key Focus: Urban densification and large-scale infrastructure projects.• Opportunities: Rail expansion, housing intensification, and mixed-use developments.Wellington• Key Focus: Seismic strengthening and government-led initiatives.• Opportunities: Continued investment in public buildings and utilities.Christchurch• Key Focus: Resilience-driven infrastructure and urban renewal.• Opportunities: Steady growth tied to population inflows and infrastructure upgrades.Queenstown• Key Focus: Tourism-driven development and attached residential projects.• Opportunities: High demand for mixed-use and hospitality construction.________________________________________Risks and OpportunitiesRisks• Global Market Volatility: Fluctuations in material costs and exchange rates could impact budgets.• Labour Shortages: Persistent skills gaps may hinder project timelines.• Natural Disasters: Ongoing climate risks will strain capacity and resources.Opportunities• Sustainability Leadership: New Zealand’s renewable energy strengths position it as a leader in green construction.• Technological Integration: BIM and other innovations will enhance productivity and project outcomes.• Government Support: Infrastructure investment and housing policies will stimulate long-term growth.________________________________________Future OutlookThe New Zealand construction sector is entering a transformative phase where sustainability, resilience, and innovation will be pivotal. Industry stakeholders must adapt to changing demands, embrace new technologies, and collaborate to unlock opportunities. At Hevet Consultants, we are committed to guiding our clients through these evolving dynamics. Whether it’s cost forecasting, strategic planning, or project management, we’re here to build the future with you.
Quantity Surveying Glossary
Adjudication: A structured dispute resolution process to resolve conflicts between parties in a construction contract. This method involves an independent adjudicator with expertise in the construction industry. Adjudication offers a swift and cost-effective solution, allowing construction projects to continue without significant delays.
Benchmarking: A process that involves comparing a project’s costs and performance against industry standards or similar projects to identify opportunities for improvement. Through benchmarking, construction professionals can adopt best practices and pinpoint inefficiencies, helping them make informed decisions to optimize project performance.
Bill of Quantities (BoQ): A comprehensive document detailing all the materials, labor, and associated costs required for a construction project. The BoQ is the foundation for tendering and cost control, offering a detailed breakdown that facilitates accurate cost estimation and comparison of contractor bids during the tender process.
BoQ Rate: The cost associated with a specific unit of measurement within the Bill of Quantities, typically expressed as a rate per unit (e.g., cost per square meter). BoQ rates are essential for accurate project cost estimation, reflecting the pricing of labor, materials, and other resources needed for each specified unit.
Capital Expenditure (CapEx): Funds allocated for long-term investments in assets such as buildings or equipment. In construction, capital expenditure is crucial for acquiring and developing assets that generate revenue or support essential infrastructure.
Capital Works: Refers to the construction, enhancement, or extension of physical assets and infrastructure. These projects can include new buildings, renovations, or infrastructure developments like roads and utilities, contributing to economic and community development.
Cash Allowances: Pre-allocated budgets for specific items or tasks that may not be fully defined in the BoQ. Cash allowances provide flexibility in accounting for uncertain or variable costs, allowing adjustments during construction to accommodate design changes or unforeseen expenses.
Cash Flow Forecast: A projection that outlines the expected inflows and outflows of funds throughout a construction project. This tool helps manage financial resources effectively, ensuring that sufficient cash is available to sustain ongoing construction activities.
Cash Flow Management: The process of monitoring and optimizing the movement of funds within a construction project to meet financial obligations. Effective cash flow management is critical for project success, involving strategic oversight of payments, invoicing, and collections to maintain a steady financial balance.
Variation: A formal document used to authorise changes to the project scope, schedule, or costs. Variations ensure clarity and agreement among all parties regarding modifications made during the construction process, preventing disputes and ensuring transparency.
Construction Phase Plan: A safety and logistics plan outlining key elements such as site layout, access, and health and safety measures for a construction project. This document ensures compliance with regulations, identifies potential hazards, and sets protocols for a safe working environment.
Contingency Fund: A reserved budget for unforeseen or unexpected expenses during the project. Contingency funds act as a financial buffer, enabling the project to address unplanned challenges without compromising progress or quality.
Cost Control: The continuous process of managing and monitoring project expenses to ensure alignment with the budget. Cost control involves tracking expenditures, comparing them with the budget, and implementing measures to address deviations, essential for maintaining profitability and ensuring the project stays on budget.
Cost Documentation: The organized recording and tracking of project cost data, including expenses, invoices, and financial records. Proper cost documentation supports accurate financial management and analysis, aiding in decision-making and cost control throughout the project.
Cost Estimation: The process of calculating the anticipated costs for a construction project, typically using historical data and analysis. Accurate cost estimation is crucial for assessing project viability and resource allocation.
Cost Forecasting: The practice of predicting future project costs using current and historical data. Cost forecasting helps construction professionals plan for financial implications, optimize resource allocation, and manage project risks.
Cost Index: A numerical value used to adjust historical cost data for inflation or market fluctuations. Cost indices allow for accurate comparisons of past and current costs, providing a benchmark for cost projections.
Cost Overrun: The amount by which actual project costs exceed the initial budget or estimate. Managing cost overruns is critical for maintaining project profitability and financial control.
Cost Plan: A detailed budgeting tool used to allocate costs across different stages of the project. The cost plan serves as a reference for tracking project expenses, ensuring efficient resource allocation.
Cost Variance: The difference between the budgeted cost and the actual cost of a project. A positive variance indicates cost savings, while a negative variance signals cost overruns.
Cost-to-Complete (CTC): An estimate of the remaining costs required to complete the project. CTC provides insights into the financial status of a project and helps in managing resources and cash flow.
Depreciation: The reduction in the value of assets over time, considered in life cycle costing. Depreciation accounts for wear and tear, helping construction professionals plan for asset replacement and allocate costs.
Dilapidation Survey: An assessment of the condition of neighboring buildings and infrastructure before construction begins, documenting their state to protect against potential damage claims.
Earned Value Analysis (EVA): A project performance assessment method that compares the budgeted cost of completed work with the actual cost. EVA helps identify deviations from the plan and informs corrective actions.
Earned Value Management (EVM): A project management technique integrating cost, schedule, and performance data to monitor progress and predict project outcomes.
Feasibility Study: An initial assessment to determine the economic viability of a project, considering financial, technical, legal, and environmental factors.
Final Account: A financial statement summarizing all costs and payments made during a project, used to close out the financial aspects.
Front-End Loading (FEL): The early project phase involves comprehensive planning, feasibility studies, and cost estimation to establish a solid foundation for project management.
Inflation Rate: The annual percentage increase in the general price level, which affects project costs. Inflation rates are factored into cost estimates to account for potential price increases during the project.
Interim Payment: Partial payments made to contractors based on completed work, providing financial support and maintaining cash flow throughout the project.
Life Cycle Costing: An analysis that considers all costs over a project’s lifespan, including construction, maintenance, and operational expenses, for informed long-term decision-making.
Liquidated Damages: A predetermined amount of compensation paid by the contractor to the client for delays or non-performance, protecting the client from potential financial losses.
Material Requisition: A formal document requesting the procurement of specific materials for the project, streamlining the supply chain.
Operating Expenditure (OpEx): Funds allocated for the day-to-day operational costs of buildings and infrastructure, such as maintenance and utilities.
Performance Bond: A financial guarantee provided by a contractor to ensure the project’s completion as per contract terms.
Procurement Strategy: A plan outlining how materials and services will be sourced, considering project requirements, budget, and available resources.
Progress Payment: Payments made to contractors at intervals, tied to specific project milestones, ensuring a fair financial arrangement as the project progresses.
Project Closeout: The final phase of a project, including inspections, documentation, and handover to the client.
Quantity Surveyor (QS): A professional responsible for managing and controlling costs within construction projects, providing accurate financial forecasts, and ensuring budget compliance.
Retention: A portion of the contract sum retained by the client until the contractor has fulfilled their obligations and rectified any defects.
Risk Management: The process of identifying, assessing, and mitigating risks to ensure project success within the defined budget and schedule.
Substantial Completion: A project milestone where the work is sufficiently complete for occupancy or use, although some minor tasks may remain.
Tendering: The competitive process where contractors submit bids based on the BoQ and project specifications, ensuring transparency and value for the client.
Value Engineering: A practice aimed at optimising a project’s value by reducing costs without compromising quality, focusing on enhancing overall project efficiency and outcomes.
Benchmarking: A process that involves comparing a project’s costs and performance against industry standards or similar projects to identify opportunities for improvement. Through benchmarking, construction professionals can adopt best practices and pinpoint inefficiencies, helping them make informed decisions to optimize project performance.
Bill of Quantities (BoQ): A comprehensive document detailing all the materials, labor, and associated costs required for a construction project. The BoQ is the foundation for tendering and cost control, offering a detailed breakdown that facilitates accurate cost estimation and comparison of contractor bids during the tender process.
BoQ Rate: The cost associated with a specific unit of measurement within the Bill of Quantities, typically expressed as a rate per unit (e.g., cost per square meter). BoQ rates are essential for accurate project cost estimation, reflecting the pricing of labor, materials, and other resources needed for each specified unit.
Capital Expenditure (CapEx): Funds allocated for long-term investments in assets such as buildings or equipment. In construction, capital expenditure is crucial for acquiring and developing assets that generate revenue or support essential infrastructure.
Capital Works: Refers to the construction, enhancement, or extension of physical assets and infrastructure. These projects can include new buildings, renovations, or infrastructure developments like roads and utilities, contributing to economic and community development.
Cash Allowances: Pre-allocated budgets for specific items or tasks that may not be fully defined in the BoQ. Cash allowances provide flexibility in accounting for uncertain or variable costs, allowing adjustments during construction to accommodate design changes or unforeseen expenses.
Cash Flow Forecast: A projection that outlines the expected inflows and outflows of funds throughout a construction project. This tool helps manage financial resources effectively, ensuring that sufficient cash is available to sustain ongoing construction activities.
Cash Flow Management: The process of monitoring and optimizing the movement of funds within a construction project to meet financial obligations. Effective cash flow management is critical for project success, involving strategic oversight of payments, invoicing, and collections to maintain a steady financial balance.
Variation: A formal document used to authorise changes to the project scope, schedule, or costs. Variations ensure clarity and agreement among all parties regarding modifications made during the construction process, preventing disputes and ensuring transparency.
Construction Phase Plan: A safety and logistics plan outlining key elements such as site layout, access, and health and safety measures for a construction project. This document ensures compliance with regulations, identifies potential hazards, and sets protocols for a safe working environment.
Contingency Fund: A reserved budget for unforeseen or unexpected expenses during the project. Contingency funds act as a financial buffer, enabling the project to address unplanned challenges without compromising progress or quality.
Cost Control: The continuous process of managing and monitoring project expenses to ensure alignment with the budget. Cost control involves tracking expenditures, comparing them with the budget, and implementing measures to address deviations, essential for maintaining profitability and ensuring the project stays on budget.
Cost Documentation: The organized recording and tracking of project cost data, including expenses, invoices, and financial records. Proper cost documentation supports accurate financial management and analysis, aiding in decision-making and cost control throughout the project.
Cost Estimation: The process of calculating the anticipated costs for a construction project, typically using historical data and analysis. Accurate cost estimation is crucial for assessing project viability and resource allocation.
Cost Forecasting: The practice of predicting future project costs using current and historical data. Cost forecasting helps construction professionals plan for financial implications, optimize resource allocation, and manage project risks.
Cost Index: A numerical value used to adjust historical cost data for inflation or market fluctuations. Cost indices allow for accurate comparisons of past and current costs, providing a benchmark for cost projections.
Cost Overrun: The amount by which actual project costs exceed the initial budget or estimate. Managing cost overruns is critical for maintaining project profitability and financial control.
Cost Plan: A detailed budgeting tool used to allocate costs across different stages of the project. The cost plan serves as a reference for tracking project expenses, ensuring efficient resource allocation.
Cost Variance: The difference between the budgeted cost and the actual cost of a project. A positive variance indicates cost savings, while a negative variance signals cost overruns.
Cost-to-Complete (CTC): An estimate of the remaining costs required to complete the project. CTC provides insights into the financial status of a project and helps in managing resources and cash flow.
Depreciation: The reduction in the value of assets over time, considered in life cycle costing. Depreciation accounts for wear and tear, helping construction professionals plan for asset replacement and allocate costs.
Dilapidation Survey: An assessment of the condition of neighboring buildings and infrastructure before construction begins, documenting their state to protect against potential damage claims.
Earned Value Analysis (EVA): A project performance assessment method that compares the budgeted cost of completed work with the actual cost. EVA helps identify deviations from the plan and informs corrective actions.
Earned Value Management (EVM): A project management technique integrating cost, schedule, and performance data to monitor progress and predict project outcomes.
Feasibility Study: An initial assessment to determine the economic viability of a project, considering financial, technical, legal, and environmental factors.
Final Account: A financial statement summarizing all costs and payments made during a project, used to close out the financial aspects.
Front-End Loading (FEL): The early project phase involves comprehensive planning, feasibility studies, and cost estimation to establish a solid foundation for project management.
Inflation Rate: The annual percentage increase in the general price level, which affects project costs. Inflation rates are factored into cost estimates to account for potential price increases during the project.
Interim Payment: Partial payments made to contractors based on completed work, providing financial support and maintaining cash flow throughout the project.
Life Cycle Costing: An analysis that considers all costs over a project’s lifespan, including construction, maintenance, and operational expenses, for informed long-term decision-making.
Liquidated Damages: A predetermined amount of compensation paid by the contractor to the client for delays or non-performance, protecting the client from potential financial losses.
Material Requisition: A formal document requesting the procurement of specific materials for the project, streamlining the supply chain.
Operating Expenditure (OpEx): Funds allocated for the day-to-day operational costs of buildings and infrastructure, such as maintenance and utilities.
Performance Bond: A financial guarantee provided by a contractor to ensure the project’s completion as per contract terms.
Procurement Strategy: A plan outlining how materials and services will be sourced, considering project requirements, budget, and available resources.
Progress Payment: Payments made to contractors at intervals, tied to specific project milestones, ensuring a fair financial arrangement as the project progresses.
Project Closeout: The final phase of a project, including inspections, documentation, and handover to the client.
Quantity Surveyor (QS): A professional responsible for managing and controlling costs within construction projects, providing accurate financial forecasts, and ensuring budget compliance.
Retention: A portion of the contract sum retained by the client until the contractor has fulfilled their obligations and rectified any defects.
Risk Management: The process of identifying, assessing, and mitigating risks to ensure project success within the defined budget and schedule.
Substantial Completion: A project milestone where the work is sufficiently complete for occupancy or use, although some minor tasks may remain.
Tendering: The competitive process where contractors submit bids based on the BoQ and project specifications, ensuring transparency and value for the client.
Value Engineering: A practice aimed at optimising a project’s value by reducing costs without compromising quality, focusing on enhancing overall project efficiency and outcomes.