The signs were there three years ago.
All the data was saying the building and construction sector had reached a significant peak.
Decline seemed inevitable, and Ankit Sharma wanted the industry to be prepared.
In 2023, the Master Builders chief executive was travelling across the country, warning businesses about ‘‘quite a significant downturn’’ which was going to hit the industry.
But what he heard down South was interesting.
Businesses had not experienced the same peaks that the likes of Wellington and Auckland had seen, and were therefore not expecting a significant downturn.
‘‘In 2024 and 2025, what we saw was that played out,’’ Mr Sharma said.
‘‘They didn’t see a significant boom, so the downturn was not significant.
‘‘As regional economies are doing well, some of those regions have now started doing a lot better.’’
With the exception of Queenstown, the southern building and construction industry had been much more consistent than other areas of New Zealand as they went through massive peaks and troughs.
‘‘A lot of southern businesses are saying: ‘well, what recession?’
‘‘I think southern businesses are a lot more resilient.’’
Of those surveyed, 93% said work was ‘‘steady or strong’’, with half already reporting a strong pipeline of work for the year ahead.
Confidence had flowed through to business outlook too, 84% expected to be in a better position in the next 12 months, including a quarter who expected to be substantially better off.
A total of 91% expected the building and construction sector to improve, and 84% expected the New Zealand economy to improve over the next year — the rest of the country was sitting at around 50%, some areas even lower.
Not a single respondent expected conditions to worsen.
The results suggested cautious optimism had now taken hold.
Builders across the South were seeing that shift reflected in their workloads and outlook, and were also clear about what was needed to keep conditions moving in the right direction.
Mr Sharma said businesses in their industry operated differently when the sector was booming.
There was so much work out there that people were not necessarily worrying about if each and every project was making a profit.
‘‘All our data was saying a significant peak, industry peak, and we were seeing that things were declining,’’ Mr Sharma said.
‘‘Generally, history will tell us we go through a boom and bust cycle.
‘‘We could just see we had just come out of a significant boom cycle, which will lead to a bust cycle.’’
As soon as you entered a trough, a job that made a loss could be the difference between the business itself making a profit or loss.
Businesses could not depend on cashflow by getting new work, as the pipeline of new work would slow down, Mr Sharma said.
‘‘We could see the pipeline will probably get squeezed out and a lot of businesses will then get at the risk of not surviving and liquidation — which is exactly what happened in the next 12-18 months.’’
Whenever New Zealand went through an economic downturn, it was always the regions which drove the recovery, followed by urban centres such as Auckland, Christchurch and Wellington.
But in this particular downturn, Mr Sharma said the strength of the regional recovery was stronger than what had been seen historically.
While it seemed to be holding, this recovery was not flowing through to the rest of the economy as it had done previously.
‘‘The gap between how the regional economies are doing versus how our urban economies are doing is actually bigger than what we have seen in recent years.
‘‘Urban New Zealand is falling behind and not catching up.’’
It was the regions which were the economic engine of New Zealand and they tended to produce a lot of the country’s exports, Mr Sharma said.
There was strong demand for dairy, horticulture and meat products globally.
That and more people choosing to move to the regions, for reasons such as more affordable housing and the growing ability to work remotely, meant conditions were primed for the building and construction sector to be a lot stronger in the South.
Demand in the sector was driven by growth.
This in turn depended on the demand for housing — which had become ‘‘significant’’ across New Zealand through post-Covid-19 pandemic migration — as well as planning, consenting and infrastructure.
The ability to scale this sustainably, particularly for places like Queenstown, could affect growth and therefore demand for building and construction.
Regions whose councils were looking 5-10 years ahead, managing their infrastructure well and had better mechanisms around planning and consenting were likely to experience more growth.
Those who did not could see their growth ‘‘disappear’’, Mr Sharma said.
‘‘In regions where we start getting some of these infrastructure bottlenecks — which are happening in some regions where they just don’t have enough water infrastructure, so the councils have come out and said, ‘well, actually, we can’t release more land for housing’ — the growth will probably at some stage disappear.’’
Mr Sharma said a lot of businesses he had spoken to in the South were becoming more diversified.
They were not only building new homes, but also doing renovations and building farm sheds.
This added to their resilience.
The performance of the southern building and construction sector showed that if New Zealand continued to invest in its regions, it could be more resilient as a country to weather increasing economic challenges.
Geopolitical challenges were not something Mr Sharma expected to disappear any time soon.
‘‘If we are expecting the world will go back to where things were in 2019, I think that’s not likely to happen for the next immediate future, maybe even medium to long term.
‘‘The world is not a very stable place. We’re actually moving away from a rules-based world, which really benefits for small nations like New Zealand.’’
The government needed to look at how it could provide certainty around policy setting, especially around building and construction planning and consenting.
Infrastructure also needed to be invested in properly.
For businesses in the building and construction sector, Mr Sharma wanted them to focus on three things: productivity, capability and adaptability.
Their industry had always operated as a shortage industry, whether it was a shortage of work or a shortage of workers.
Managing capability, workforce and future talent was quickly becoming a challenge they would have to manage.
But Mr Sharma believed businesses in their industry understood the value of strong business fundamentals and diversifying their operations — particularly those in the South.
‘‘If you talk to any businesses, or Master Builders down South, they will tell you that they feel very privileged that they’ve got consistent pipeline of work.’’
