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Business Environment Profiles - New Zealand

Capital expenditure on residential buildings

Published: 28 May 2024

Key Metrics

Capital expenditure on residential buildings

Total (2025)

15 $ billion

Annualized Growth 2020-25

-0.6 %

Definition of Capital expenditure on residential buildings

This report analyses the level of expenditure on residential buildings. This includes outlays on new dwellings including houses, flats, and apartments. The value of additions and alterations to domestic buildings, such as garages, is also included. The data for this report is sourced from Statistics New Zealand (Tatauranga Aotearoa) and is expressed in billions of chain-adjusted 2009-10 dollars per financial year.

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Recent Trends – Capital expenditure on residential buildings

IBISWorld forecasts capital expenditure on residential buildings to decrease by 4.3% in 2024-25, to $15.4 billion. This can be attributed partly to a fall in dwelling consents issued due to the elevated costs of borrowing. Higher mortgage interest rates, tighter bank lending practices and falling housing prices have collapsed housing investment. The previous Labour Government had announced the phasing out of tax deductions for mortgage interest, would weigh on investment in new rental properties. However, the new Government has reversed that decision, bringing in interest deductions over the next couple of years. This has eased falls in the capital expenditure on residential buildings.

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 since then have contracted affordability, leading to capital expenditure on residential buildings to fall.

In response to a growing shortage of housing supply, 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 aiming to increase the supply of affordable houses. Overall, IBISWorld forecasts capital expenditure on residential buildings to dip at a compound annual rate of 0.6% over the five years through 2024-25.

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5-Year Outlook – Capital expenditure on residential buildings

IBISWorld forecasts capital expenditure on residential buildings to inch upwards by 0.6% in 2025-...

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