Housing crash to plunge New Zealand into recession


BRANZ and Pacifecon have published their 10th annual National Construction Pipeline Report, which shows that New Zealand residential construction is expected to fall by more than one-third, or $11 billion, to $19.6 billion per year over the next five years.

In turn, total construction activity is forecast to fall from a peak of $50.9 billion in 2021 to $41.7 billion in 2027, meaning the fall is completely driven by the house-building sector:

New Zealand construction activity

New Zealand construction activity forecast to tank, driven by housing.

The decline in residential construction will obviously detract from New Zealand’s economic growth. But the bigger concern is that household consumption is likely to fall following the Reserve Bank of New Zealand’s (RBNZ) aggressive interest rate hikes and falling house prices.


Tony Alexander’s latest Spending Plans Survey showed that New Zealand households are planning to slash spending in response to soaring interest rates and inflation, as well as falling wealth.

Specifically, a net 18% of respondents plan to cut consumption spending over the next 3 to 6 months, suggesting “falling household spending across a range of goods and services over the remainder of this year”:

New Zealand spending intentions

New Zealand consumers to cut back spending.


Part of this decline in spending intentions is because the majority of Kiwis expect their housing wealth to decline:

Kiwi health

Kiwis expect wealth to fall in line with house prices.

Furthermore, most Kiwis are pessimistic about the future, thanks to rising inflation and rate hikes:

Kiwi confidence

Kiwis are pessimistic about the future.

Tony Alexander’s survey findings align with New Zealand’s consumer confidence index, which has plunged to recessionary levels. As expected, Kiwis with mortgages are the most pessimistic, with the “good time to buy a major item” sub-index – which correlates most strongly with household consumption – firmly negative:

Confidence by home ownership status

Kiwis with mortgages more pessimistic.


The RBNZ has explicitly stated that it will continue lifting the official cash rate to contain inflation, which hit a 32-year high 7.3% over Q2.

If it follows through, Kiwi buyer sentiment will remain at recessionary levels, household consumption will fall, house prices and construction will tank, and the New Zealand economy risks being thrown into recession.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.