The Cordell Construction Cost Index (CCCI) indicated that national costs rose 1.6 per cent in the three months to September, well above the typical quarterly increase of about 0.8 per cent, according to a recent RNZ report.
The annual construction cost growth was also the fastest annual rate since the first quarter of 2018 after it also rose 5.5 per cent in the year to September.
While timber, including structural timber and cladding, were the key contributors to the overall cost increases, it seems that metal costs and products were also a factor.
CoreLogic Chief Property Economist, Kelvin Davidson said that it was likely the construction industry would remain busy for quite some time to come.
“Cost pressures as shown by the CCCI may get worse before they get better. Indeed, anecdotal evidence suggests that the latest lockdowns will simply sustain the disruptions on supply chains and construction material costs,” he said.
Mr Davidson also said that new builds were likely to continue to drive demand and prices.
“Investors are also now strongly incentivised to buy new builds, due to their exemption from the loan to value ratio rules and continued ability to claim mortgage interest as a deductible expense for the first 20 years of a property’s life.”
“For anyone who is looking to build or to renovate, or for someone who owns a business involved in the residential construction industry, it means they are all likely to be facing significantly higher costs,” Mr Davidson said in the report.