Housing consents have recorded their largest monthly fall in nearly two years.
Statistics New Zealand says the number of consents issued dropped 9.5% in May once seasonal factors are taken into account.
Housing consents have been extremely volatile so far this year, having risen 13.4% in April.
Construction had been expected to provide a significant boost to the economic recovery.
However NZIER economist Shamubeel Eaqub says Treasury's Budget forecasts that it would account for a quarter of economic growth in the year to next March overestimated the sector's strength.
He expects the boost to the economy from new houses to be half that forecast by the Treasury.
A business confidence survey released on Monday showed confidence among builders has been falling since late last year.
