DECEMBER '23 | HARDWAREJOURNAL.COM.AU 15 Home building inflation at its lowest since 2020 Fletcher Building remains optimistic about the housing market New Zealand's housebuilding costs are rising at the slowest pace in nearly three years due to subdued demand caused by high-interest rates and economic uncertainty. Construction costs rose 0.5 per cent in the three months through September, the smallest gain since the fourth quarter of 2020, CoreLogic New Zealand reported. From a year earlier, the costs had climbed 3.4 per cent. The Reserve Bank's monetary tightening and weak economy have led to a decline in house prices and consumer confidence, resulting in a slowdown in the demand for new homes. Building consents in the year through August were also 17 per cent lower than the year-earlier period. The construction cost index is based on the cost of building a 200 square metre brick and tile house including labour, materials, plant hire and sub-contractors. The gauge rose a record 10.4 per cent in 2022, reflecting a squeeze on the supply of building materials such as wallboard, and a shortage of tradesmen and labourers due to the closed border preventing the arrival of foreign workers. “We have now entered a more subdued phase for construction cost inflation, reflecting the marked easing in materials supply chains, compared to the COVID-affected period over 2021 and 2022,” said CoreLogic Chief Property Economist Kelvin Davidson. “It would not be a surprise to see the quarterly rate of change continue in the vicinity of 0.5 per cent for the next few quarters.” “While new builds probably will not get cheaper, a controlled annual growth rate of two to three per cent gives confidence for buyers to invest, and for developers to keep bringing projects forward,” Mr Davidson said. Fletcher Building is optimistic about exceeding sales targets due to positive signs in the housing market. During the notes for the company's annual meeting in October, Chief Executive Officer Ross Taylor mentioned that the sales of houses were going well, averaging around 20 to 25 per week so far this financial year. He also stated that house prices had stabilised and were now starting to trend up slightly, Stuff reported. “If this momentum in sales continues, there could be upside to our prior 700800 unit sales target for the financial year,” Mr Taylor said. Fletcher Building's prospects in the housing market are looking up this year. In the previous financial year, the company sold 617 units, which was lower than the 670 units sold the year before. The decrease was attributed to a rapid increase in interest rates, which led to a decreasing demand and an average drop in house prices of about 15 per cent. The latest report from the Real Estate Institute in September indicated a rise in positive sentiment in the property market during spring. The report showed stable prices, an increase in sales counts, and a decrease in the number of days it took properties to sell. The figures showed sales across New Zealand were 5.1 per cent higher in September compared to the same time last year, taking total sales to 5439. Real Estate Institute of New Zealand (REINZ) Chief Executive Officer Jen Baird said that confidence in the property market was strengthening, with signs of an upward trend continuing to grow. Mr Taylor said the lift in the housing market would be positive for other areas of the company. “This market trend is a positive for our New Zealand materials and distributions businesses, as increased activity across the residential end market will ultimately flow into the volumes across these businesses,” he said. Mr Taylor said profits from the company's residential and development division would be more heavily weighted towards the second half of the financial year due to the settlement schedule.