Building market favouring consumers
The average cost of building a standard three-bedroom home in New Zealand’s main centres rose just 1.8% over the 12 months to May, according to valuation firm QV.
That compares to an annual increase of 4.9% in December 2023 and 9.5% in June 2023.
Average building costs rose only 0.3% over the three months to May. Inevitably, prices rose by some individual components, including increases of 2.5% for suspended ceilings, 2.2% for fire-proofing, 1.6% for carpentry and 0.8% for exterior walls/finish. But prices fell for other components, including reductions of 2.3% for metal framing, 1.6% for site preparation costs, 1.4% for structural steel and 0.7% for frame costs.
QV quantity surveyor Martin Bisset said the rate of building cost inflation is trending down, in part due to difficulties being experienced by the construction industry.
“Significant economic headwinds continue to blow, which has drastically reduced activity across the wider construction sector. For consumers, the upside of that is there are fewer capacity constraints and therefore less upward pressure on pricing. Contractors are having to put their best price forward in order to win work,” he said.
“We’re also seeing that many of the supply chain issues that arose as a result of Covid-19 have now been rectified, with fuel costs and interest rates also sitting relatively steady for the time being. Inflationary pressures remain stubbornly high generally – both at home and abroad – but this is also firmly on a downward track.”
Building reforms likely to dampen construction price growth pressure
Mr Bisset said the Government's proposed changes to the Building Act, which aim to make it simpler and cheaper to build, were good news.
“Anything that makes the cost of building cheaper will be a good thing, provided we also ensure the quality and reliability of the products and materials being used,” he said.
“However, due to the timeframe it will take to implement the changes to the act, and then obtain approval for the products, there is unlikely to be a reduction in building costs in the near future. But we’ll be watching this proposal very closely, as it progresses.”
It’s great to see construction costs increasing at below-inflation rates, because that makes it easier to plan and finance new builds. Do you know anyone in your network who wants to build, whether a single home or a larger project? If so, please introduce us, as I can help them fund the construction.