The value of New Zealand residential building work inched higher in the March quarter but total building values fell, weighed down by a sharp fall in non-residential construction.

The seasonally adjusted value of residential building work gained 0.1 per cent in the three months ended March 31, after a 2.3 per cent rise in the fourth quarter of 2016, Statistics New Zealand said.

Still, residential building work volumes fell a seasonally adjusted 0.8 per cent in the latest three-month period, turning around a 0.7 per cent rise in the fourth quarter.

Total building volumes fell 3.5 per cent, seasonally adjusted, in the first quarter, while the value fell 2.2 per cent.

The total was weighed by a 6.4 per cent slide in non-residential building values and a 7.2 per cent drop in non-residential building volumes.

“Building activity adjusted for price changes fell for the first time in two years, due to a decrease in commercial and other non-residential building work this quarter,” Stats NZ senior manager Jason Attewell said.

Capacity constraints are continuing to bite as skilled labour remains in high demand.

Firms continued to struggle to find labour in the March quarter, with a net 41 per cent finding it hard to find skilled workers and a net 24 per cent struggling with unskilled staff, compared to 36 per cent for skilled hires and 24 per cent for unskilled in December, according to the latest New Zealand Institute of Economic Research’s quarterly survey of business opinion.

According to Stats NZ, the volume trend for all building work has declined, but is still 68 per cent higher than a low point in the September 2011 quarter.

It also said the value of building consents rose 6.6 per cent in the March 2017 quarter compared with the December 2016 quarter – made up of a 0.2 per cent rise for residential buildings, and a 20 per cent rise for non-residential buildings.

“Building consents are an indicator of future building activity, and almost all consented work is eventually completed,” Stats NZ said.

Kiwibank chief economist Zoe Wallis said rising building costs and tighter financial conditions slowed the pace of construction growth and will likely persist until at least the September general election.

“We expected the pullback in residential building WPIP [work put in place] given the softer consents data we have been seeing,” she said in a note.

“The tailing-off of work in Canterbury continues to place on drag on headline numbers, with non-residential work in Christchurch having declined in the last couple of quarters.”

The actual value of all building work was $4.94 billion, up 10.9 per cent on the year.

By Rebecca Howard