Construction firms offering large discounts to avoid collapse

Construction companies are struggling to stay afloat as orders dry up amid tough economic times, with some slashing quotes by as much as 50 percent to get whatever work they can.

Latest data from the Building Research Association of New Zealand showed that liquidations in the construction sector rose 37 percent in February year on year, accounting for 31 percent of all liquidations nationwide.

Latest figures from the Ministry of Business, Innovation and Employment (MBIE) showed a similar trend.

The number of businesses with an MBIE construction code that had a liquidator appointed nearly doubled for the year ending 30 June 2023 compared to the previous year, climbing from 210 in 2022 to 416.

By the end of June 2025, 687 companies with an MBIE construction code had a liquidator appointed, marking a more than threefold increase in just three years.

Amid the sharp rise in closures, some Chinese construction firms had resorted in cutting quote prices and squeezing already tight margins to stay in business.

Henry Wang, a former carpenter who had worked in the construction industry for eight years and now ran his own business, said pay rates for carpentry work had dropped sharply compared to the industry's recent peak.

"The market was booming from 2020 to 2022," Wang said. "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 said he began feeling the pressure in 2023, as layoffs started to spread across the construction sector and available work began to dry up.

Wang, who worked for a Chinese construction firm, recalled long hours during the boom years.

"We used to work from 7am to 6pm - sometimes even until 7pm - including Saturdays when business was really busy," he said.

"But gradually, the company could only guarantee three days of work a week," he said. "By the end of 2023, they started cutting staff because there simply wasn't any work left."

He estimated that between 60 and 80 percent of the workers at his former company were made redundant. He eventually left as well, citing a lack of available work.

Now the owner of a small construction firm with six employees based in Auckland, Wang said most of his clients were in the commercial building sector.

He remains cautious about the sector's outlook.

"I'm not optimistic about the market this year or even next year," he said, noting that the project pipeline heading into 2026 is alarmingly thin.

Wang said the downturn had triggered a destructive price war in the industry, which he found deeply concerning.

"There isn't much work out there," he said. "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."

Steven Jin, director of commercial fit out company Unique Constructions, felt the same pressure.

Jin started his business in 2010, recalling a boom period between 2016 and 2018, when a surge of Chinese restaurants and retail shops opened across the market.

However, that momentum faded quickly.

Business confidence took a hit during the Covid-19 pandemic, and his project volume started dropping sharply from 2023.

"Compared to 2018 and 2019, our business volume fell by more than 60 percent in 2023 and 2024," he said.

Jin described the current construction market as bleak, noting that many contractors he had worked with had also been forced to slash their quote prices to remain competitive.

"It's very challenging to do business right now," he said. "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."

Jin said he didn't expect the market to rebound this year.

For now, his goal is simple: Survive and stay afloat.

"Everyone is competing against each other," he said. "Even big construction companies, their goal is to survive and avoid liquidation."

Fletcher Building announced Wednesday it was considering the sale of its construction division assets following a strategic review of the business.

Recovery remains uneven

Julien Leys, chief executive of the Building Industry Federation, said New Zealand's building sector was largely made up of small businesses, typically employing between three and five people.

He said Asian-owned construction companies accounted for roughly 22 percent of the market, contributing as much as $48 million per month in construction activity in the Auckland region.

Leys said Asian construction companies were facing the same challenges affecting developers across the country, including a slowdown in residential property sales.

"It's just a fact that we're seeing a downturn across the sector," he said. "People are finding it harder to get work, particularly those smaller builders."

Leys said while the construction sector might see an uptick in activity by the middle of next year, the current market remained challenging.

"There's still uncertainty that is affecting people making decisions about whether to start a build or a project," he said. "That uncertainty means all the subcontractors and contractors involved in those projects don't get work.

"Right now, what we're seeing is that their order books - where they'd usually have an actual pipeline of activity for the next 12 months to work on - pretty much there's nothing in it."

According to the latest building consent data from Stats NZ, 33,530 new dwellings were consented in the year ending on 31 May, a 3.8 percent decrease against the same period in 2024.

Gareth Kiernan, chief forecaster at Infometrics, said New Zealand experienced a residential construction boom in 2022, with approximately 51,000 consents issued, driven by surging house prices and historically low interest rates.

However, he said it had since become much more difficult for developers to bring projects to market at a cost buyers were willing to pay.

House prices fell substantially through 2022 into 2023, while interest rates and building costs continued to climb over the same period, he said.

"Residential construction firms and the businesses supplying materials expanded their capacity a lot during the boom to meet demand," Kiernan said. "But now, there's just too much capacity across the industry, and that's causing issues for firms and leading to those liquidations."

Kiernan said net migration shifts had also contributed to the softening of the housing market.

"There was an undersupply of housing, particularly in Auckland," he said. "We haven't been able to keep up with demand through much of the last decade.

"We had a migration boom initially when the borders reopened in 2023. But that's slowed away again, and now the housing market is still pretty soft.

"Potentially, over the next year or so, we could be starting to move into a position with the housing market rather than being undersupplied to actually oversupplied.

Meanwhile, Kiernan said a downturn in non-residential construction had emerged over the past six to nine months, as broader economic weakness began to weigh on commercial developments, adding further pressure across the sector.

"Previously, commercial building was still holding up relatively well," he said. "But now we're seeing a flat to downturn in residential construction, and a downturn emerging in commercial building as well."

Ankit Sharma, chief executive of the Registered Master Builders Association, said builders nationwide, particularly small and family-owned firms, were under significant financial strain, driven by tightening profit margins, escalating costs and, in many cases, a lack of forward visibility.

Sharma said residential activity expectations were beginning to lift in some regions.

"We're starting to see early signs that the tide may be turning," he said. "In some regions like Central Otago, builders are telling us they're as busy as they've ever been."

However, Sharma said the recovery remained uneven, particularly across parts of the upper North Island, including Auckland, where the pipeline of new work remained uncertain.

Still, he said momentum was beginning to build.

"Government initiatives such as the Investment Boost scheme and proposed procurement reforms are welcome steps that could help unlock activity and give firms greater confidence to invest," he said.

Kiernan said the construction sector would eventually adjust to more sustainable levels of activity.

"It's a case of almost like much of the rest of the economy," he said.

"Things were really overheated in 2021 to 2022, and now it's kind of needing to move back, or consolidate back to what are more sort of sustainable levels of activity that can be kept going over the medium term."