The cost of building a new house in New Zealand rose 1.7% in the September quarter, the fastest quarterly increase since late 2022.
That’s the finding of Cotality’s Cordell Construction Cost Index (CCCI), released on 8 October. The quarterly rise picked up from increases of between 0.9% and 1.1% over the previous three quarters.
Annual growth lifted too, from 3.5% in the June quarter to 4.8%. That’s the strongest annual increase since the June quarter of 2023, when it hit 6.4%, and it’s above the index’s long-term average of 4.0%, measured back to 2012.
The CCCI tracks one benchmark build. It’s a single-storey, three-bedroom, two-bathroom standalone house of 200 square metres on a concrete slab, with brick veneer and a concrete tile roof, built over a normal build duration. The index measures the change in that cost rather than the cost itself, and now sits at 173.4 against a base of 100 in the December quarter of 2012.
Kelvin Davidson, chief property economist at Cotality NZ, said the result marked a clear shift from the more subdued conditions of the past two years.
“After a period of subdued changes, the cost to build a new house in New Zealand has started to rise more materially,” he said.
Davidson said builders had carried some of the increase so far.
“Builders have absorbed some cost increases, particularly where existing projects are covered by fixed-price contracts. However, pricing for upcoming work is beginning to rise, suggesting households considering a new build may face a different cost environment in the months ahead.”
Cotality’s report puts the rise down to two things. The first is a busier sector. The 12-month running total of new dwelling consents has climbed from fewer than 34,000 to more than 40,000.
Consents won’t all turn into construction work, the report says, but higher numbers tend to reduce spare capacity across the industry and add to cost pressure.
The second is what it costs to get materials to site. Davidson said industry participants were reporting higher delivery and input costs linked to conflict in the Middle East, which the report identifies as the US-Iran conflict. Fuel surcharges on deliveries are part of that.
“Products experiencing cost increases include petroleum-based plumbing inputs, PVC, sealants, roof and ceramic tiles, reinforcing products and structural steel,” he said.
Materials make up around 50% of the CCCI. Wages account for about 40%, and other costs, including consenting and professional fees, make up the remaining 10%.
The report describes wages as flatter, which leaves materials as the clear explanation for the faster cost growth of recent months.
For much of the past two years, build costs rose more slowly than general prices. In the year to June, the CCCI rose 3.5% while the consumers price index rose 4.1%, according to the CPI series in Cotality’s report. September quarter CPI figures haven’t been released yet.
The latest jump is still well short of the last peak. The report’s figures show annual build cost growth reached 10.4% in the December quarter of 2022, then slowed to 0.6% by the June quarter of 2024, when the index fell 1.1% in a single quarter. Over the past year it has climbed from 165.4 to 173.4.
Davidson expects construction costs to stay under upward pressure in the coming months.
“There is considerable uncertainty around the international outlook, and builders may need to pass on further cost increases where possible,” he said.
Passing them on won’t be simple, he said. “However, this may be challenging while the values of existing properties remain relatively flat and mortgage rates are rising. For some households, the changing cost equation could influence the choice between undertaking a new build and purchasing an existing property.”
The report takes that a step further. If households tilt back toward buying existing homes, it says, new dwelling consents would tend to dip again. It also notes that listings of available properties remain high.
“After a significant downturn that had begun to turn a corner, renewed global uncertainty is an unwelcome development for the construction industry. Further cost pressures may still flow through the pipeline,” Davidson said.
For builders pricing work now, the index points to the end of a stretch where costs could be absorbed. The products Davidson names are the ones to recheck against supplier pricing before the next quote goes out.
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