The New Zealand construction sector is showing signs of stabilization after years of decline, with residential building consents slowing their downward trajectory and non-residential projects finding footing in strategic infrastructure initiatives. For investors, this presents a nuanced opportunity to identify undervalued firms positioned to capitalize on regional demand drivers and sector recovery. Let’s dissect the trends and pinpoint where to allocate capital.

Residential Building Consents: The Bottoming-Out Signal

Residential construction consents have been in freefall since 2022, dropping from 51,015 annual consents to 33,530 by May 2025—a 34% decline. However, the rate of contraction is moderating. The annual decline slowed to just 3.8% in 2025, down sharply from a 22.8% drop in 2024. This deceleration hints at a potential bottom, especially as stand-alone house consents rose 2.4% year-on-year in 2025, bucking the broader trend. Apartments also showed resilience, increasing 6.2%, signaling a shift toward single-family homes and small-scale urban developments.

This stabilization is critical. The number of new dwellings per 1,000 residents dropped to 6.3 in 2025—still below the 1970s peak of 13.4—but the pace of decline has slowed. For investors, this means the worst may be behind the sector.

Regional Demand Drivers: Where Growth Will Spark

The recovery isn’t uniform. Two regions are pivotal:

  1. Auckland: The NZD13.8 billion water infrastructure plan includes over 1,000 projects, directly benefiting firms with local expertise. Auckland’s transit upgrades, like the City Rail Link, also drive commercial and residential activity.
  2. Canterbury: The NZD10.4 billion 10-year transport plan aims to boost road capacity, creating demand for contractors specializing in civil works.

Firms with a strong regional footprint in these areas will outperform. For example:
– Fulton Hogan, a leader in road and bridge projects, is well-positioned for Canterbury’s transport upgrades.
– Downer EDI, active in urban services and infrastructure, benefits from Auckland’s water and transit projects.

Non-Residential Sector: Stability in Strategic Sectors

While non-residential consents fell 28% year-on-year in early 2025, certain sub-sectors are resilient:
– Renewable energy: The government’s 100% renewable electricity target by 2030 is fueling demand for solar/wind infrastructure.
– Logistics and data centers: E-commerce growth and digital transformation are driving commercial construction in industrial zones.

Firms like Vinci, with global expertise in energy and transport infrastructure, could leverage New Zealand’s green push.

Valuation Metrics: Finding the Bargains

The sector’s valuation is mixed but presents opportunities for selective plays. Key metrics to watch:

  1. EV/Revenue Multiples: Construction firms typically trade at 0.5–1.0x EV/sales, given their capital-intensive nature. Firms with strong balance sheets (low debt, healthy margins) could be undervalued.

  2. Profitability: Companies with exposure to stand-alone housing and apartment projects (higher margins than multi-unit) may see improving margins as costs stabilize.

Investment Recommendations1. Downer EDI (ASX: DON)

  • Why: Dominates Auckland’s urban infrastructure projects. Its diversified portfolio includes transport, utilities, and housing.
  • Risk: Labor shortages could delay projects.

2. Fulton Hogan (NZX: FHN)

  • Why: Strong in Canterbury’s transport upgrades and road projects. Its 2024 revenue of NZD995 million positions it to scale with government spending.
  • Risk: Dependent on public contracts; policy shifts could disrupt timelines.

3. Vinci SA (EPA: VIN)

  • Why: Global scale and expertise in renewable energy infrastructure align with New Zealand’s green targets.
  • Risk: Geopolitical risks in overseas markets could impact parent company performance.

The Bottom Line

New Zealand’s construction sector is at an inflection point. Residential declines are stabilizing, non-residential projects are finding footing in strategic areas, and valuations offer room for growth. Investors should target firms with regional expertise in Auckland/Canterbury and exposure to resilient segments like stand-alone housing and renewable energy. While risks like labor shortages and regulatory hurdles remain, the long-term outlook is bright for those who act now.

Actionable Takeaway: Buy Fulton Hogan for its Canterbury exposure and Downer EDI for Auckland’s infrastructure boom. Avoid over-leveraged firms lacking regional focus. The recovery is underway—act before the sector’s valuation catches up to reality.