Home building costs are up but these increases are slowing

by | Aug 15, 2023

The cost of building a standard three-bedroom home rose by 9.5 per cent over the year to June, according to new figures from Quotable Value’s CostBuilder database. However, with this said, building costs have slowed to half the rate they were at the same time in 2022.

QV CostBuilder spokesperson Martin Bisset said a 9.5 per cent increase in the cost to build the average three-bedroom home was considerable by historic standards, reported Stuff Business.

“Even though construction costs continue to rise, they have definitely slowed throughout the first six months of this year,” he said.

“It looks as though they are starting to level out now, with the worst of the construction inflation boom now firmly behind us, and strong demand for materials and labour continuing to ease across much of the country.”

CostBuilder is a subscription-based building cost platform that provides data ranging from building costs per square metre to the indicative costs of more than 8000 other items, as well as labour rates and more.

It showed the biggest elemental price increase since the last update in December was sanitary plumbing – up 4.9 per cent. Costs related to interior doors increased by 3.5 per cent, with windows and exterior doors up by 3.1 per cent as they now have to meet the requirements of the new H1 energy efficiency regulations.

On average the data showed that each trade rate had increased by 2.5 per cent since the end of last year. The five largest increases were for suspended ceilings up 16.2 per cent; fireproofing up 10.1 per cent; metal framing up 8.9 per cent; hardware up 8.8 per cent; and roof coverings up 8.1 per cent.

Mr Bisset said it is important to remember the figures are averages – the cost of building is always dependent on the level of finishes, internal layout, and other elements in a home.

Uncertainty in the building industry, and the economy, make it difficult to predict how costs will evolve over the remainder of the year, but, likely, they will eventually stabilise, he said.

“With inflation and interest rates stubbornly high, a general election in October, geopolitical issues and rebuild work on Cyclone Gabrielle still to fully get going, there is a lot of economic instability in the domestic construction market,” said Mr Bisset.

New Zealand Certified Builders Chief Executive Malcolm Fleming said the rate of building cost increases has slowed markedly. Though costs are continuing to increase in isolated areas, particularly with overseas products, general increases have slowed across the board, he said.

“But we are hearing reports from builders that they are getting approaches from merchants who are actively canvassing them to open up accounts. That was unheard of over the last two to three years, and it suggests there is now a lot more competition in that space, which is good,” Mr Fleming said.

While demand for new home building has slipped, demand for alteration and addition work is up, and builders have picked that up, he said.

“It does not entirely fill the gap though, so for those who do want to build a new home the likelihood of getting hold of a good builder is now much higher than it has been in recent years because the industry has more capacity,” Mr Fleming said.