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While residential construction costs in Rodney may not have dropped, the latest report from CoreLogic reveals they’re not increasing as rapidly.
Known as the Cordell Construction Cost Index (CCCI), the report shows annual costs growth over the past 12 months in New Zealand has slowed to just 1.1%, down from 2023’s rise of 2.4%, and well below the spike of 10.4% in 2022.
It says the cost to build a standard single storey three-bedroom, two-bathroom stand-alone dwelling in NZ increased by only 0.6% in the three months to December.
CoreLogic chief property economist Kelvin Davidson says it’s little surprise that construction cost growth has slowed in the past 12 to 18 months.
“The previous covid-related pressures on materials supply chains such as plasterboard are no longer an issue, and there’s also been a wider slowdown in the number of new dwellings consented and actual residential construction work being undertaken.
“As a result, there’s been reduced pressure on the industry’s capacity, which naturally dampens cost growth, both for materials and labour.”
Despite this, local construction companies are still having to deal with build costs that are at an all-time high, according to interest.co.nz.
Warkworth Builders owner Dave Wade says the square metre rate for a house, which includes everything from the foundations through to painting, tiling and finishing at the end of a job, has gone up hugely over the past four or five years.
“At the moment costs are certainly not going up in leaps and bounds like they were previously, but certainly nothing’s gone down, except for maybe two items of timber that I know of.
“A timber merchant tried to tell me, ‘we’ve dropped the price’. Well, I’ve got a spreadsheet and when I’m entering the prices of materials it comes up with the price I bought it for last time.
“One of the plumbers that we use just put their rates up, but we’re only talking two or three dollars an hour, it wasn’t up 10 dollars an hour. So it’s definitely not increasing as rapidly,” he says.
Wade says many of his clients are scaling back what they want built.
“We’re pricing a job for someone at the moment. I think they got a bit of a shock when we gave them the estimate. So they dialled it back, talked to the architect and redesigned a few things.
“House prices may go down but in general building costs are not going to be dropping. I’m talking plumbing, electrical supply, merchant supply, that sort of thing. I don’t think that’s going to go down, not in the immediate future.”
TH Construction director Tim Henry says construction costs started to plateau in mid 2024 but are still staying up there.
“When costs are high it means less builds and renovations happening.
“A lot of projects don’t get off the ground because clients’ budgets get exceeded with the material costs. Many just can’t afford to go ahead with a project and will then put it off.
“Especially a lot of the smaller, mum and dads-type builds. Unless they’ve got a really good income, they’re gonna have to shelve it or rethink.”
Henry says there’s a lot of shopping around for the cheapest quote.
“Many of the people I’ve priced for over the last year or so have had five builders pricing for them – they’re getting multiple quotes.
“A few years ago, it was between you and maybe two builders if that, but now customers are really looking for the cheapest build costs, but not necessarily getting the best job. They’re just going with the cheapest quotes, which isn’t always a great idea.”
Davidson says construction sector activity is unlikely to suddenly surge higher, especially with the slowdown in population growth due to the decline in net migration.
“Construction conditions look set to improve in 2025 as mortgage rates drop, but overall cost growth may still remain relatively controlled.
“There are also signs in the new dwellings data from Stats NZ that a floor may have been reached and that a rise in construction is likely in 2025.”
