Construction slump over?

The residential construction sector is sparking back to life.

After two brutal years of decline, building consents for new homes jumped 27% in September compared to last year, hitting the highest monthly total in more than two years.

Stats NZ reported 3,747 new home consents in September 2025. Strip out seasonal effects and you get a 7.2% month-on-month increase, following a 6.1% rise in August. These are the highest consent numbers we’ve seen since late 2022.

For the year ending September 2025, 34,882 new homes were consented nationally, up 3.6% on the previous 12 months. Multi-unit homes led the charge, jumping 5.6% to 18,904 units, with apartments surging 49% and townhouses climbing 5.3%. Stand-alone houses increased a more modest 2.9% to 15,958.

Auckland and Otago are driving most of the national increase. Wellington is also lifting off its lows, though recovery there remains tentative.

Auckland consented 14,495 homes in the year to September, up 5.4% annually. Otago jumped 16% to 2,473 homes. On the flipside, Northland consents dropped 21%, Waikato fell 4.4%, and Canterbury eased 1.7%.

For Auckland, this represents a genuine turnaround. Auckland consents peaked at a record 21,000 in 2022. When interest rates spiked in late 2021 and 2022, those numbers collapsed. Now, with rates falling and confidence returning, the pipeline is refilling.

Government’s “Flood the Market” Strategy

The Government has made no secret of its housing strategy: flood the market with supply to drive down costs. Housing Minister Chris Bishop and Building and Construction Minister Chris Penk have systematically dismantled red tape around residential construction throughout 2025.

Their legislative centrepiece allows Kiwis to build granny flats up to 70 square metres without building or resource consents. The law passed its final reading in October and comes into effect in Q1 2026.

The Government expects this to deliver roughly 13,000 additional granny flats over the next decade.

Economists Cautiously Optimistic

Westpac senior economist Satish Ranchhod captured the mood:
“After falling sharply through 2023 and 2024, homebuilding activity has been tracking sideways since the start of the year. The stabilisation in consent numbers indicates that we’re unlikely to see further significant declines over the remainder of this year.”

Westpac expects consent numbers to continue trending higher over 2026 as lower interest rates work through the economy.

ASB chief economist Nick Tuffley remains cautious, noting the housing market has “lost what little momentum it had” despite lower mortgage rates. ASB expects a meaningful construction recovery only from 2026, as falling rates more strongly impact household cashflows and confidence.

Rental Market Implications

Consent numbers have direct implications for rental supply and competition over the next 12–24 months.

More rental stock will eventually hit the market, which could create downward pressure on rents in areas with strong construction activity — particularly Auckland’s intensification zones along transport corridors.

But additional supply is desperately needed for the long term, even when tenant demand right now is relatively soft. Also note that properties being built — especially townhouses and apartments near public transport — target a different demographic than traditional standalone rental homes.

The granny flat exemption could create unexpected opportunities. Savvy investors with larger sections might add 70 sqm units to existing properties, instantly boosting their rental income without the hassle and cost of traditional consenting.

Smaller and Denser

Stats NZ data shows homes are getting smaller. The average floor area for standalone houses in the year to January 2025 was 176 sqm, down from 183 sqm the previous year and the lowest since 1994.

Multi-unit housing is dominating growth, representing 54% of all new consents.

This shift reflects both regulatory changes (like the Auckland Unitary Plan enabling greater density) and economic reality — smaller homes are more affordable to build and buy. For landlords, it means understanding the tenant demographic that these properties serve: typically younger, more mobile renters who prioritise location over space.

More Intensification Coming

Last month, Minister Chris Bishop confirmed the streamlined planning process for Auckland Council’s new housing plan, known as Plan Change 120 (PC120). This replaces the controversial Plan Change 78, which the Government allowed Auckland to withdraw.

PC120 must enable housing capacity equal to or greater than PC78, with the plan to be notified by 10 October. The focus is on increasing density around public transport corridors and key centres — a “common sense solution for Auckland,” according to Auckland Minister Simeon Brown.

Property investors should keep their eyes open for infill development and subdivision opportunities in well-located Auckland sites near transport hubs. The planning settings are being deliberately structured to encourage this type of development.

Watch for These Shifts

If you’re a landlord or considering property investment, these trends matter:

• Supply is coming. More rental stock will hit the market over the next 12–24 months, particularly in Auckland. Be realistic about rent expectations in high-growth areas.
• Location matters more than ever. Properties near public transport centres will face new competition from townhouses and apartments. Stand-alone homes in suburban locations face less immediate pressure.
• Granny flat opportunities. From Q1 2026, adding a 70 sqm unit to suitable properties becomes much easier and cheaper. Run the numbers on existing holdings.
• Development timing. With builders’ capacity still constrained, securing good contractors early for any development work is critical.
• Interest rate sensitivity. Construction activity follows interest rates with a lag. If rates continue falling through 2026, expect another wave of consent growth by late 2026/early 2027.

More supply is positive for tenant choice and housing affordability, but it creates competitive pressure for landlords, particularly in intensification zones. Understand where supply is genuinely constrained versus where new stock will flood in — and position your portfolio accordingly.

The Government’s systematic removal of regulatory barriers is working. Whether it’s enough to solve New Zealand’s housing crisis remains to be seen. But for the first time in two years, the construction sector has genuine momentum — and that’s something worth watching.

If you’re concerned about how new housing supply might affect your properties, or if you’re considering adding a granny flat to boost rental income, we can help you understand the opportunities and risks specific to your situation. Call 0800 GOODWINS to arrange a chat with one of our property experts.