Construction Firms Face Crisis as Orders Vanish, Prices Plummet

Industry Leaders Warn of Prolonged Downturn Amid Economic Headwinds

New Zealand’s construction sector is grappling with a severe downturn, forcing companies to slash prices by up to 50% to secure dwindling work. Liquidations are soaring, signaling a widespread struggle for survival.

Soaring Liquidations Signal Industry Distress

Data reveals a stark reality for builders, with liquidations in the construction sector surging 37% year-on-year in February. This rise accounts for a significant portion of all national business failures, underscoring the depth of the crisis.

Figures from the Ministry of Business, Innovation and Employment (MBIE) paint an even more alarming picture. The number of construction businesses placed in liquidation nearly doubled in the year to June 2023 compared to the previous year, jumping from 210 to 416. By June 2025, over 687 companies had faced liquidation, a more than threefold increase in just three years.

Price Wars Erupt as Businesses Fight for Survival

In a desperate bid to stay operational, some Chinese construction firms have resorted to aggressive price-cutting. This strategy is squeezing already thin profit margins, with some quotes slashed by as much as half.

Henry Wang, a carpenter with eight years of industry experience now running his own firm, described the market’s dramatic shift. “The market was booming from 2020 to 2022,” Wang recalled. “At that time, a carpenter could earn around $150 to $160 per square meter on a residential build. However, now payments have fallen by as much as 40 to 50 percent.”

Wang began feeling the pressure in 2023 as layoffs increased and work opportunities diminished. He noted that his former employer, a Chinese construction firm, cut its workforce by an estimated 60% to 80% due to a lack of projects.

“There isn’t much work out there,” Wang stated. “A lot of companies are dropping their quote prices. Some are even slashing them by half just to win clients and stay in business. All I can do is hang in there and try to survive these next two years.” He expressed pessimism about the market outlook for both this year and next, citing a concerningly thin project pipeline extending to 2026.

Commercial Fit-Outs Suffer Major Decline

Steven Jin, director of Unique Constructions, echoed these sentiments. His commercial fit-out business, established in 2010, experienced a boom between 2016 and 2018, but business volume has plummeted by over 60% since 2023 compared to 2018-2019 levels.

“It’s very challenging to do business right now,” Jin admitted. “We’re squeezing margins, sometimes down to just 5 percent or even operating at no profit at all. But we have no other choice. With the market like this, the only way to compete is on price.” His immediate goal is simply to survive and remain solvent, acknowledging that even large construction companies are focused on avoiding liquidation.

The news comes as Fletcher Building announced it is considering selling its construction division assets following a strategic review.

Uneven Recovery Expected Amid Market Uncertainty

Julien Leys, chief executive of the Building Industry Federation, highlighted that New Zealand’s building sector is largely composed of small businesses. Asian-owned construction companies represent about 22% of the market, contributing substantially to Auckland’s construction activity.

“It’s just a fact that we’re seeing a downturn across the sector,” Leys stated. “People are finding it harder to get work, particularly those smaller builders.” He cautioned that while a sector upturn might occur by mid-next year, the current market remains tough.

The lack of work is evident in the empty order books of contractors, with pipelines that typically extend 12 months now showing little to no activity. Latest Stats NZ data indicates a 3.8% decrease in new dwelling consents in the year ending May 2025, with 33,530 new homes consented.

Past Boom Fuels Current Overcapacity

Gareth Kiernan, chief forecaster at Infometrics, attributed the current difficulties to the significant expansion of industry capacity during the 2022 residential construction boom. That boom, fueled by low interest rates and rising house prices, saw around 51,000 consents issued.

However, a subsequent fall in house prices through 2022-2023, coupled with rising interest and building costs, made it harder for developers to sell projects at viable prices. “There’s just too much capacity across the industry, and that’s causing issues for firms and leading to those liquidations,” Kiernan explained.

He also pointed to shifts in net migration, which initially boosted the housing market after border reopenings in 2023 but has since slowed, contributing to a soft housing market. There is a potential for an oversupply of housing in the coming year, a stark contrast to the decade-long undersupply.

A downturn in non-residential construction has also emerged, impacting commercial developments as broader economic weakness takes hold.

Mixed Regional Recovery and Government Support

Ankit Sharma, chief executive of the Registered Master Builders Association, stated that builders nationwide, particularly small and family-run businesses, are under immense financial strain due to squeezed profit margins, escalating costs, and a lack of clear future work.

While some regions, like Central Otago, are experiencing strong demand, Sharma noted that recovery remains patchy, especially in parts of the upper North Island, including Auckland, where future work prospects are uncertain. Government initiatives like the Investment Boost scheme and proposed procurement reforms are seen as potential catalysts for activity and investment.

Kiernan suggested the sector will eventually recalibrate to more sustainable activity levels, moving from an overheated 2021-2022 period back to more manageable long-term operations.