Fuel price drives up construction costs

While demand remains strong, construction costs are starting to feel upward pressure, primarily from rising diesel prices.

 

QV says that although overall cost escalation remains modest, fuel-intensive trades such as excavation, piling, and demolition are experiencing sharper increases. Excavation costs, for example, rose 7.8% in a month due to the diesel spike.

 

QV CostBuilder spokesperson and experienced quantity surveyor Martin Bisset said fuel was the main cost driver right now.

 

“The increase in the price of diesel has had an immediate impact on areas such as site preparation, excavation and substructure work, where fuel is a significant input for machinery used in these operations. That’s where the most upward pressure on construction costs is coming from right now.”

 

Global oil prices and supply chain pressures, particularly linked to recent geopolitical events are driving higher fuel and freight costs.

 

While the full effect on total building costs per square metre is not yet clear, QV expects a clearer picture in its next CostBuilder update.

 

“We’re not seeing the widespread supply chain disruption of recent years, but fuel and freight are certainly re-emerging as important cost drivers,” Bisset said.

 

“It’s important to recognise that this appears to be a short-term spike at this stage. At some point, fuel prices are expected to normalise, and that should ease some of the pressure coming through.”

 

Construction costs continue to show a mixed picture. Recent data indicates price rises for materials like plasterboard, insulation, and certain timber products, while some items, including copper and steel pipework, have seen declines.

 

Bisset noted that, overall, the market remains fairly balanced, though uncertainty has increased.

 

“The key takeaway is that cost growth is still relatively moderate, but volatility has increased,” he said.

Rising construction costs might seem like a signal to slow projects, but developers are pushing ahead.

 

Population growth, urbanisation, and government housing initiatives are driving sustained demand. Builders can expect a steady flow of projects, particularly in high-density developments where the market is strongest.

 

Trades such as excavation, site preparation, and substructure work are feeling the brunt of rising fuel prices. Smaller builders or contractors working on these trades may face tighter margins and may not have the flexibility to absorb sudden cost spikes.

 

There is work to be had, but rising fuel and material costs are a real constraint, particularly for smaller builders or trades heavily reliant on fuel-intensive machinery.

The number of new home consents continues to rise, even as short-term construction cost pressures emerge.

 

There were 37,534 new homes consented across Aotearoa New Zealand in the year to February 2026, marking a 12 percent increase compared to the previous year, according to figures from Stats NZ.

 

“The annual number of new home consents has increased for seven consecutive months,” economic indicators spokesperson Michelle Feyen said.

 

Growth was driven mainly by multi-unit homes, with 16,303 townhouses, flats and units up 15%, 2,467 apartments up 34%, and 17,089 stand-alone houses up 7.8%.

 

Activity was strongest in Auckland, which recorded 15,972 consents, followed by Canterbury with 7,721, Waikato with 2,992, Otago with 2,698 and Wellington with 2,138.

 

In February 2026 alone, 3,168 new homes were consented, up 23% on February 2025, with seasonally adjusted consent numbers also rising 2.7% from January.

 

Note: Building consents indicate intent to build rather than actual construction work underway. There is often a time lag between consents granted and projects starting onsite.