Updated data from Stats NZ shows that completion numbers for new dwellings have largely tracked as we had estimated over the last two years, pushing to a record high of 43,160 at the end of 2023. Completion numbers over the last six months have been a bit higher than we anticipated, which reflects that the downward trend in the proportion of consents being progressed has generally not continued since the previous data was published in 2022. Timeframes for projects to start and progress through the building phase blew out further in 2022, but they are starting to normalise as all the disruptions associated with the pandemic fade into the past.

Late last year, in response to strong interest from clients, we published our first estimates and forecasts of residential completion numbers. These figures built on Stats NZ’s estimates up to March 2022, with modelling of completions in subsequent quarters based on historical relationships with economic growth, house prices, and building costs. We also utilised code compliance certificate (CCC) data from Auckland Council to provide more information about trends in completions, including the length of time that new homes were taking to progress from consent to CCC.

Stats NZ’s latest release includes updated data on completions up to the end of 2023 and has allowed us to compare our estimates with actual results. Chart 1 compares the Stats NZ figures with the numbers published in our February 2024 forecasts. We are delighted with the accuracy of our estimates and, after the several iterations of modelling needed to generate plausible numbers, we are comfortable with continuing to use our model to provide future estimates and forecasts of completion numbers.

As expected, dwelling completions have risen substantially since mid-2022, lifting from about 34,000 completions to 40,000pa by the September 2023 quarter. Our estimates have tracked actual completions very closely until the second half of last year, with our figure for completions in the December 2023 quarter falling 8.0% short of Stats NZ’s published number.

At the end of 2021, consents across most building types were taking almost twice as long to reach their first building inspection due to a range of factors, including labour and skills shortages, COVID-19 isolation requirements, materials shortages, and supply chain disruptions. Things got worse in 2022 before they got better, with Chart 2 showing that project timeframes across the various construction types peaked at between 85% and 176% longer than normal to reach this milestone during 2022/23.

Chart 2 also shows that these delays are now shrinking, particularly for residential alterations and non-residential building, with consents issued in September 2023 taking only 23-33% longer than the historical average to reach their first inspection. The delays across the other building types are still substantial, at 79-88% longer than normal, but these timeframes are also coming down as the capacity pressures in the construction industry become less acute and the effects of the pandemic dissipate.

Chart 3 suggests that once things get going, the build process is smoother, particularly for new dwellings. Houses and attached dwellings are now taking 10-11 weeks longer than normal to reach their final inspection. This difference is not much greater than the delay between consent and first inspection, and it compares favourably with the delay of 21-23 weeks for projects that were consented in late 2021 and early 2022.

Things are not quite so rosy across the other building types, with the length of time until final inspection still close to or at its pandemic peaks. This trend partly reflects the longer timeframes that these building types usually have anyway, which means that the latest figures are still being more affected by COVID-related delays early in the construction process. For residential alterations, capacity limitations in the residential sector have previously made it very difficult to find tradespeople to do smaller renovations, although these pressures are now easing. And non-residential activity has of course increased substantially between mid-2022 and the end of 2023, meaning this segment is probably still more affected by resourcing issues than other parts of the construction industry.

Stats NZ’s previous dataset showed downward trends in completion rates across all building types since about 2013. However, the latest estimates up to the end of 2020 suggest that those downward trends have mostly been halted (see Chart 4). Estimated completion rates for consents during 2020 were higher than the previously published figures for the year to March 2019 for all building types except non-residential.

We also note that previously published completion rates for the year to March 2019 have been revised up by between 1.6 and 3.3 percentage points. These revisions reflect the completion of particularly slow projects that were not captured when the data was previously published in the first half of 2022.

Although the estimated completion rates have largely stabilised, we still see a risk of lower completion rates for consents in 2021 and 2022. More difficult economic conditions subsequently mean that there is a higher likelihood of more recent projects not progressing to the construction phase and being left to lapse.

In summary, the trends shown in Stats NZ’s latest data are largely as expected, adding validity to our forecasts of completions. We expect delays in the construction process to continue shrinking as activity reduces from its peak, supply chains normalise, and labour shortages in the industry become less intense. In the near-term, completion rates could come under downward pressure from weaker economic conditions, particularly for those quarters when consent numbers were close to or at record highs. However, with residential consent numbers now declining and less speculative activity occurring, we would expect completion rates to push higher again over the medium term.