Capital expenditure on residential buildings

IBISWorld forecasts capital expenditure on residential buildings to swell by 3.1% in 2025-26, to $13.9 billion. This growth can be attributed partly to a hike in dwelling consents issued following a reduction in the costs of borrowing. Capital expenditure on residential buildings has risen compared to the year prior, a result of lower mortgage interest rates and swelling housing prices.

The housing supply shortage contributed to the expansion in capital expenditure on residential buildings over the two years through 2021-22. Housing prices in Auckland and Wellington surged over the period, supporting construction activity and capital expenditure on residential buildings. In addition, consistently low interest rates reduced the cost of debt, making housing development more affordable. However, significant interest rate hikes in 2022-23 and 2023-24 negatively impacted affordability, leading to a reduction in capital expenditure on residential buildings.

In response to a growing housing supply shortage, the Central Government enacted several reforms to improve the situation. They introduced the KiwiBuild program in May 2018, which aimed to support housing affordability by building 100,000 homes by 2027-28. However, this program has been deemed unachievable within the time frame. In March 2021, the Central Government announced the Housing Acceleration Fund and in May 2022, it introduced the Affordable Housing Fund, both of which aim to boost the supply of affordable housing. Overall, IBISWorld forecasts capital expenditure on residential buildings to dip at a compound annual rate of 3.1% over the five years through the end of 2025-26.