Share:
The construction sector is in the midst of its most significant reset in half a century.
Traditional approaches are no longer viable. Over the past three decades, productivity has collapsed — in Australia, output per labour hour has fallen 53% (Productivity Commission, February 2025), mirrored by similar declines in New Zealand. At the same time, insolvencies are at record highs, supply chains are stretched, and regulatory and sustainability expectations on developers, builders, and designers are accelerating.
However, 2025 marked a pivot rather than a collapse. We expect an acceleration of measurable forces are reshaping design, construction, and development practices through 2026–2027. Technology, data, sustainability, and modular manufacturing are no longer optional — they are the operational backbone of a resilient, efficient, and compliant industry.
Productivity Broke — And the Industry Hit a Wall
For over three decades, Australia’s construction productivity slid backwards (CEDA, 2025), and New Zealand also declined. Builders worked longer hours, paid more for materials, battled tight schedules, and delivered fewer homes per labour hour.
Yet early signs of a transformation appeared in 2025: technology adoption, regulatory change, and modular construction are creating a new foundation for efficiency.
Trend 1: Smart Buildings & Performance Data Stop Being Optional
Smart buildings are transitioning from luxury, integrated infrastructure, to essential inclusions — but this does not mean a ‘2020s solution’ requiring the home to be fully wired for high-level automation or AI control from day one. Instead, technology is being applied incrementally, cloud based and adding intelligence and convenience where it delivers the most value. Think of it like the automotive industry: cars started with electric windows and locks, then gradually incorporated adaptive cruise control, lane assist, and now semi-autonomous driving over two decades.
In homes, this incremental approach manifests as narrow, targeted smart applications to help the occupant understand and use the building more efficiently. For example:
- Energy efficiency: Smart thermostats and water heaters that optimise usage based on occupancy patterns.
- Safety & security: Door and window sensors, smoke detectors, smart locks, and elderly care and pet smarts integrated into simple apps.
- Convenience: Lighting or irrigation systems that adjust automatically or via voice commands.
- Health & comfort: Air-quality monitors or automated ventilation that responds to environmental changes.
Smart systems also underpin compliance with climate disclosure and energy performance standards, providing the data infrastructure required without mandating full home automation from the outset.
In New Zealand, these incremental smart technologies are particularly valuable due to:
- Extreme climate variability requiring flexible energy and heating controls
- High energy costs that reward optimisation
- Small and dispersed supply chains, which favour adaptable, modular solutions
Smart homes will grow smarter over time, using retrofittable technologies delivering measurable operational and lifestyle benefits without needing to be fully “wired” as part of a new build.
Trend 2: AI Moves From Pilot to Production
AI is no longer experimental — it is operational. Thirty-seven percent of Australian firms now deploy AI-enabled design coordination (Half, 2025). AI reduces pre construction, marketing, schedule optimisation, and material take-offs from days to hours, lowering rework and cost risk and overruns.
New Zealand’s digital-ready design ecosystem, and openness to model-based verification mean AI adoption directly addresses consenting delays, labour shortages, and cost unpredictability.
Trend 3: Prefab and Modular Construction Scale Up
Traditional construction cannot meet housing targets. Australia’s USD 54 million push into prefab and modular manufacturing targets 1.2 million homes by 2029, with the market projected to reach USD 13.71 billion by 2030 (Mordor, November 2025).
In New Zealand, modular is a productivity and resilience solution. Labour shortages, weather delays, high logistics costs, and rising demand for low-carbon homes make offsite construction critical. Existing capabilities through Kāinga Ora and private modular innovators remain under-utilised — presenting a major growth opportunity.
Trend 4: Sustainability Moves From Market Choice to Legal Requirement
Environmental compliance is now mandatory. Australia’s NCC 2025 and NSW Sustainable Buildings SEPP introduce stricter energy standards and carbon reduction targets. Large and medium firms must disclose climate-related financial risks by 2028. Energy scoring and labelling of homes will be required.
New Zealand already operates under mature ESG expectations: carbon risk disclosure for finance, MBIE and BRANZ-led embodied carbon frameworks, and whole-of-life carbon measurement initiatives (MBIE, 2020). Compliance is no longer optional — it is a market and competitive requirement.
Trend 5: Skills Shortage Reaches Crisis Point
Australia needs 90,000 additional construction workers (BuildSkill, 2024 ), with VET completions down 50% in the last decade. New Zealand requires the scaled equivalent of 15,000–18,000 workers but faces declining apprenticeship uptake, ageing workforce, and migration volatility.
Coupled with declining apprenticeship intake, changed social pressures on school leavers, gig economy labour competition, post pandemic attrition, the industry is finding ways to use less labour hours, more productively.
Digital tools, AI, and modular methods reduce reliance on on-site labour, while workers with digital competencies command premium rates. Technology adoption is no longer a “nice-to-have” — it is essential to maintain productivity.
Trend 6: Changing Design Norms — Homes Evolve With Society
Homes are no longer one-size-fits-all. Work-from-home norms, longer lifespans, health-conscious living, and government housing support are shaping design requirements.
- Flexible spaces for hybrid work and wellness
- Multi-generational living and adaptable layouts
- Integration of healthy materials, energy-efficient systems, and technology
- Customisation driven by individual household needs
Every home is now a unique combination of lifestyle, wellness, and sustainability requirements — amplifying the need for digital design platforms, modular solutions, and precise workflow coordination. Platforms like utecture enable design variation at scale: floor plans, layouts, and systems can be customised while maintaining regulatory compliance, energy efficiency, and construction precision.
Trend 7: Material Costs Stabilise — But Permanently Higher
Construction costs rose sharply between 2020–2024: +31% for construction generally, +40.8% for house building (ABS, 2024). Australia and New Zealand face a new price baseline driven by global demand, energy constraints, and logistics challenges.
Efficiency through bulk procurement, modular manufacturing, waste reduction, and design optimisation becomes critical to protect margins.
Trend 8: Resource Scarcity — Availability Trumps Cost
Availability of materials is becoming more critical than price. Lead times, stock levels, and supply certainty increasingly dictate design and construction decisions. Builders pay premiums to secure delivery, and flexible designs that can accommodate substitutions are now standard.
Key NZ dynamics:
- Smaller order volumes amplify scarcity impacts
- Weather and logistics disruptions increase reliance on prefabrication
- Offsite and digital workflows allow materials to be secured early, reducing project risk
Resource planning, digital quantification, and real-time stock tracking are becoming core competitive advantages.
Trend 9: Insolvency Risk Remains Elevated
Small construction businesses remain most exposed to cash flow misalignment, regulatory complexity, and material volatility. Firms leveraging integrated design-to-manufacture workflows, AI, and modular approaches are better positioned to survive and thrive.
The New Construction Operating Model (2026–27)
Old Model:
- Manual workflows
- Paper-based compliance
- Site-led problem solving
- High rework
- Fragmented supply chain
- Skilled labour dependency
New Model:
- Digital-first design
- AI-enabled optimisation
- Factory-led construction
- Compliance-by-design
- Smart building systems
- Carbon and energy transparency
- Integrated supply-chain data
The labour hours to meet housing and sustainability targets simply do not exist under the old model. Design technology and manufacturing principles now replace those hours, ensuring speed, certainty, and compliance.
Conclusion: The Reset Moment
The home construction sector in 2027 will look materially different from 2023. Productivity pressures, resource scarcity, regulatory shifts, and evolving lifestyle expectations have forced a transformation that is already underway.
The winners will:
- Treat digital tools and platforms as foundational
- Move design upstream to solve downstream problems
- Embrace modular manufacturing and precise quantification
- Build sustainability into every design decision
- Leverage AI for speed, certainty, and compliance
- Train workers in digital competencies, not just trade skills
The reset isn’t coming — it’s here. The opportunity lies in creating a sector that is resilient, affordable, sustainable, and capable of delivering the homes communities need.