The growth rate of construction costs in New Zealand has dropped below long-term averages, as the industry completes a wave of building consents and resolve COVID-19 supply chain disruptions.
CoreLogic’s latest Cordell Construction Cost Index (CCCI) recorded a 0.5% increase in the first quarter of the year, less than half the long-term quarterly average of 1.1%.
The annual change of 2.3% is well down on the peak of 10.4% recorded in Q4 2022 and is the lowest rate in almost eight years.
CoreLogic Chief Property Economist Kelvin Davidson said construction costs had spiked during 2022 due to lingering COVID-affected supply chain issues, as well as a boom in construction activity.
He said on a rolling 12-month basis New Zealand’s dwelling consents peaked at more than 51,000 in May 2022.
“Supply chains have normalised and house-building activity has pulled back, easing the pressure on capacity and therefore cost growth,” he said.
“Most costs have stayed relatively stable since the end of 2023 and the CCCI has recorded no significant movement across any particular product or labour rates, which can account for up to half the cost of a new build, excluding land.”
Mr Davidson highlighted the normalisation of construction growth rates would benefit both builders and consumers following unprecedented industry volatility, resulting in construction costs being 25% higher than pre-COVID levels.
“The industry is facing less pressure on workloads and the decline in new dwelling consents suggests this softer phase of construction activity may remain in place for a reasonable period,” he said.
“Flatter costs mean builders can price jobs more accurately, and consumers can be more confident that their final price won’t have spiralled by the time a job as been completed.”
“While construction costs or the price of new builds won’t get any cheaper the expected annual growth rate of 3-4% over 2024 means the cost to build won’t be spiking higher either.”
CoreLogic’s research, tracks and reports on materials and labour costs which flows through to its Cordell construction solutions to help businesses make more informed decisions, estimate rebuild and insurance quotes easily and, ultimately, appropriate risk effectively.
The CCCI report measures the rate of change of construction costs within the residential market for a typical, ‘standard’ three-bedroom, two-bathroom brick and tile single-storey dwelling.
To read the report, visit www.corelogic.co.nz/reports/cordell-construction-cost-index.
CoreLogic New Zealand