Westpac report urges building industry to prepare for economic slowdown

Experts are urging the building industry to start getting prepared with the economy set to slow down this year.

A Westpac research paper released on Friday morning has outlined steps the sector should take to get its financial state in order. 

Residential building activity in New Zealand is expected to slow over the second half of 2023 as the country plunges into recession.

The report said "a downturn is coming" and building firms needed to become sustainable, which required transformational change.

However, it said there was a limited appetite for major changes - given the relatively high returns already enjoyed by the sector and the small size of New Zealand's housing market.

"We're starting to see building consents come off… and that's because basically, the financial incentives to build are less favourable than they were before," explained Westpac NZ industry economist Paul Clark.

"During the bad times, for want of a better word, we do see building activity slow and those [smaller firms] are usually the first casualties," Clark told AM.

He warned firms to be across their costs and revenue ahead of the expected slowdown.

"That's not a given because a lot of players in the industry are really small, and they're operationally focused - so really know what your costs are and really know what your revenues are, and then take measures to boost your revenues and minimise your costs."

Longer-term, Clark said there were big changes firms could make to be in a position for sustainable growth.

That included large-scale investment in new building processes and digital technologies, the report said.