Late 2024 / early 2025 saw our builders and designers seeing a better sentiment with enquires coming back to life but a few months in, 2025 fell on its face and stumbled through. Will this happen again in 2026?

There are some good signs

New Zealand is an export driven economy; close to 25% of our GDP. The export sector has been doing well since mid-2024 so that was part of the sentiment improvement in early 2025.

Source: Stats NZ

Now, Milk is continuing to do well. Meat has kicked in with the best growth in 20 years. Forestry has also seen some improvement. Even wool was up by close to 20% on the year before.

Exports have a limited direct impact on construction activity. Farmers start by retiring the debt from the previous cycle. Then comes on-farm investment. This spending flows to their providers in the regions and from there to the cities. We are seeing this in our enquiries. The regional areas that have kept ticking along, the big cities are where it is hardest.

The impact of sentiment

The thing about the economy is that it is made up of people making decisions. While we all like to believe that we make decisions based on fact. Human nature is we use facts to justify the conclusions we are already leaning towards. So how people feel about how things are going has a material impact on when and if they will open their wallets.

Tony Alexander, the economist, does a survey of his readers to give a feel for what is happening. This correlates with the YourQS gut feel from our customers. 2025 Started looking better until it didn’t. Then it started improving later in the year. 

International uncertainty

The big sentiment hit early in 2025 came from the US’s mercurial president and his tariffs. Whether you agree with tariffs or not (I don’t), the problem was the unpredictability of them. Business hates uncertainty: they’d rather have bad news than no news.

An example of the local impact of this is one of our builders had a client with a consented house project. Their business exports farm machinery to the US. The tariffs were going to add $1m-$1.5m to their annual costs. They put the project on hold until they knew what the rate was going to be and if they would be able to pass it on. Despite the US Supreme Court ruling, it doesn’t look like tariffs are going away any time soon.

How well the US economy has held up is a surprise though, as 90 - 96% of the tariffs are being passed to consumers. Through the late 70’s and early 80’s NZ saw the long-term damage done by protectionism to local industry. I am expecting the US to hurt at some point. Being less export dependent than NZ, it won’t be as bad as the late 80’s was for us.

Interest rates dropping have helped

The post Covid boom in everything saw inflation take-off. Interest rates subsequently increased to slow it down, making it harder to buy houses. Job uncertainty. High costs. High interest rates. Low or declining house prices. All combined these hit the construction sector hard.

Source: Macro Trends

With inflation mostly under control, we have seen interest rates dropping. It is likely that we are at the end of the lowering cycle though.

Source: Reserve Bank

The house price pain appears over with prices close to the long-term trend. I don’t see much changing over the next year or two.

Source: Reserve Bank

My view: 2026 should be more positive than 2025 but not life changing

Business should get easier through the year, but I’m not expecting any rapid changes. My thinking is to size your business thinking based on where you are now. Consolidate and improve your systems and processes. Focus on delivering competitive value but be ready for upticks in growth.

Maybe we call it "Fix in 26":

• Rebuilding balance sheets
• Aligning pricing models
• Rebuilding pipelines
• Tightening systems
• Restoring margins