The level of construction activity in New Zealand is likely to remain elevated until at least mid-2018, despite the winding down of the Christchurch rebuild, Westpac economists say.
It has been six years since the first of the devastating earthquakes struck Canterbury. In addition to the immense human cost of the earthquakes, the period of reconstruction that followed has played a significant role in shaping the nationwide economic landscape.
Westpac acting chief economist Michael Gordon expected the current situation to remain the case for some time to come.
The rebuild had been the nation's largest building project, with about $32billion of planned work - excluding the impact of cost increases.
While there was still a large amount of work to go, reconstruction was well advanced, with about 55% of planned work completed.
The advanced state of the rebuild had some important implications, he said.
First, the composition of work was changing, In the early stages of the rebuild, work was focused on the replacement of essential infrastructure and repairs to damaged homes. Work on those areas was continuing but most of the planned spending was now complete and activity in those areas had been slowing.
In the case of residential construction, consent issuance was now down more than 10% from its peak. At the same time, work on non-residential projects had been increasing, Mr Gordon said.
''This will change the mix of skills required for the rebuild. Secondly, and importantly for nationwide GDP growth and employment, we are now past the peak of the rebuild.''
Reconstruction activity would remain strong but there would no longer be the month-to-month increases in spending seen in previous years. Over time, the gradual wind down in reconstruction activity would be a drag on growth, he said.
As rebuild activity wound down, it was inevitable other parts of Canterbury's economy would also be affected.
''This will be especially evident in areas such as retail spending, which have received a boost from rebuild related spending an unemployment. However, any slowdown in overall regional GDP growth is likely to be more modest than the profile of rebuild activity would imply.''
Although rebuild spending had started gradually slowing, the latest building activity showed overall construction activity in Canterbury had held up, Mr Gordon said.
Westpac was forecasting a period of strong construction activity remaining as activity increased in other regions.
The ''centre of gravity'' for the construction sector had been shifting to Auckland. Strong population growth and low levels of building since the global financial crisis had left the city with an underbuild of about 30,000 homes.
As Auckland's population continued growing at a solid pace, home building levels in the region would need to rise to about 11,000 a year for most of the next decade to gradually alleviate the tightness in the housing market, he said.
''That would be an extremely strong period of building activity as a comparison with the 24,000 homes in Canterbury requiring major repairs or rebuilding.''
Strength in construction was not just a story about Auckland and Canterbury. Although Auckland accounted for about 50% of the nation's population growth, it only accounted for about one-third of the increase in building consents issued recently.
The number of building consents issued had been rising in other regions with notable gains in Tauranga, Hamilton and Queenstown. There was also a large pipeline of infrastructure work planned in coming years, Mr Gordon said.
''Putting it all together, leaves us with a strong outlook for construction spending over the coming years.''
