New Zealand construction confidence slips but stays high

Kennards Hire has published survey findings showing most New Zealand construction leaders remain confident about industry growth, although confidence has fallen from a year earlier.

The company's Construction Confidence Check surveyed more than 200 New Zealand construction business leaders and decision-makers. It found 84% expect the sector to grow over the next five years, while 79% said the industry had remained stable over the past 12 months.

That resilience sits alongside broad concern about costs, project delivery and financial stability. Almost all respondents, 98%, said cost-of-living pressures were affecting their business, while 59% were concerned about insolvency, business closures or employment instability across the sector over the next 12 months.

The findings suggest confidence has not disappeared, but has become more measured. The survey recorded a 9% year-on-year drop, with respondents pointing to economic uncertainty, rising costs, tighter customer budgets, labour gaps, planning delays and margin pressure.

Housing demand and private sector investment were each cited by 39% of respondents as the main contributors to growth over the next five years. Infrastructure investment followed at 38%, while sustainability and ESG requirements were named by 37%, and government policy and incentives by 36%.

At the same time, business leaders identified several risks that could weigh on the industry's prospects. More than half, 55%, said economic uncertainty affecting investment and housing demand could contribute to decline over the next five years, and 53% pointed to low margins and financial instability.

Planning delays and regulation concerns were identified by 47% of respondents, while 41% cited labour shortages and workforce constraints. The figures underline how companies are balancing long-term demand with short-term operational pressure.

Cost strain

One of the clearest themes in the survey was the effect of cost pressure on customer behaviour and business decisions. Around 60% of New Zealand respondents said tighter customer budgets were delaying project approvals, compared with 48% in Australia.

Reduced activity has also flowed through to the pipeline of work. More than half of respondents, 52%, said they had seen lower levels of customer renovation or project activity, while 54% said they were increasingly relying on hired equipment rather than buying it outright.

That shift in equipment strategy reflects a broader effort to conserve cash and limit capital spending. Another 51% said they were facing pressure to increase project pricing, indicating firms were trying to pass on at least part of their higher operating costs.

Businesses also reported that delays and productivity problems were adding directly to costs. Nearly all respondents, 96%, said these issues were generating additional expense.

The biggest source of delays was time spent coordinating multiple suppliers and project managers, cited by 67% of respondents. This was followed by a lack of skilled labour or specialist knowledge at 61%, and material shortages or poor-quality materials at 60%.

Equipment or technology constraints were also a factor, mentioned by 55% of respondents. Taken together, the results point to an industry where projects may still be available, but delivering them on time and at a workable margin has become harder.

Practical response

In response, firms said they were focusing on practical changes rather than large-scale expansion. The most common step was training and upskilling workers to improve productivity, cited by 40% of respondents.

Another 34% said they were improving project management and delivery as part of cost-saving efforts, while 32% said they were leasing or hiring equipment instead of purchasing it. Some 31% said they were adopting more energy-efficient or sustainable equipment and practices, and 29% said they were investing in technology or equipment to improve efficiency and productivity.

Businesses also indicated that supplier relationships are becoming more important. Around 35% said they wanted to partner with suppliers that offer end-to-end project management or project delivery, suggesting reducing friction in delivery is becoming a commercial priority.

Some firms are also taking a more selective approach to work. Nearly a third, 31%, said they were leaning towards lower-risk projects, while 28% said they were outsourcing or subcontracting specialised work.

Richard White, General Manager, Kennards Hire New Zealand, said the past two years had changed how leaders were approaching the market.

"There is an expected shift from cautious optimism to practical realism over the two years of the Construction Confidence Check in New Zealand, especially in the wake of issues like the global fuel crisis and an upcoming General Election," White said.

He said the industry was moving from expectation to action.

"Leaders have moved beyond a hopeful stage to look at solutions. Specifically, how they can train and retain staff, deliver cost-effective solutions to labour and logistics, and what's needed to future-proof their businesses. And they're doing it all while balancing global pressures, national cost-of-living roadblocks and the general uncertainty of an Election year.

"The businesses that remain resilient will be those that can adapt quickly, spend wisely, and keep projects moving despite the pressures around them," White said.

ESG and labour

The survey also found sustainability remains part of the sector's long-term outlook, even as firms deal with immediate commercial pressure. Some 37% of respondents said sustainability and ESG requirements would be among the biggest contributors to industry growth over the next five years.

Almost all respondents, 99%, said they were prioritising ESG initiatives in some form, including emissions reduction, energy efficiency and supplier ESG performance. Across Australia and New Zealand, 34% cited supplier ESG performance as a key focus area.

Workforce development remained another major issue. When asked what would help attract people into construction careers, 45% of New Zealand respondents pointed to clearer career pathways and long-term employment opportunities, 43% cited expanding the talent pool through diversity and new workforce initiatives, and 38% said investment in training, apprenticeships and upskilling programmes would help.

The survey covered 617 senior business leaders and decision-makers from construction businesses with 20 or more employees across Australia and New Zealand, including 205 respondents in New Zealand.