

Homebuilding costs rose just 1.1% in 2024
Residential building costs largely flatlined in 2024, according to the Cordell Construction Cost Index, which measures changes in the cost of building a one-storey house with two bathrooms and three bedrooms.
Building costs rose 0.6% in December, compared to the long-term quarterly average of 1.0%. During 2024, building costs rose just 1.1%, compared to 2.4% in 2023 and 10.4% in 2022.
CoreLogic Chief Property Economist Kelvin Davidson said this slowdown in construction cost growth was unsurprising.
“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,” he said.
“As a result, there’s been reduced pressure on the industry’s capacity, which naturally dampens cost growth, both for materials and labour.”
What to expect in 2025
Mr Davidson said the construction sector was experiencing a deep and prolonged downturn, although construction activity and dwelling consent numbers were still above previous troughs.
However, Mr Davidson said the industry was likely to experience better conditions this year.
“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,” he said.
If that happened, it would put upward pressure on building prices.
On a related note, Mr Davidson said that both the loan-to-value ratio rules and the debt-to-income restrictions were incentivising buyers to look at new builds – which might also lead to an increase in construction activity and building costs.
Finance is key
As you know, the most important part of any homebuilding project is securing the finance, because that determines whether the project can even get started.
With that in mind, if you have any clients who are thinking about building a home, please introduce them to me, so I can help them with the construction loan.