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The building and construction industry in New Zealand has experienced a marked slowdown in cost inflation, signalling a significant shift from the heightened levels of recent years. Cost inflation has slowed dramatically due to reduced pressures in the sector, improved supply conditions, and falling commodity prices, according to a new report from industry research company […]
The building and construction industry in New Zealand has experienced a marked slowdown in cost inflation, signalling a significant shift from the heightened levels of recent years. Cost inflation has slowed dramatically due to reduced pressures in the sector, improved supply conditions, and falling commodity prices, according to a new report from industry research company Macromonitor.
The new report, New Zealand Construction Cost Trends, provides detailed cost escalation projections for all categories of construction inputs in New Zealand. Construction cost inflation, which reached a peak of 14% in 2021/22, has significantly slowed to just 0.44% in the year to December 2024. This is the lowest annual inflation rate since June 2020, when it stood at just 0.40%.
“While declines in some costs are evident, a full reversal to pre-2021/22 price levels is unlikely. Instead, construction costs are expected to stabilise and grow at more normal rates, but from the current elevated base,” according to the report’s author, Macromonitor Economist Abdul Hannan.
The report highlights that falling prices for key materials, such as steel and oil, have been pivotal in easing overall construction input costs. Improvements in global and local supply chains have also contributed to reducing inflationary pressures, as logistical disruptions that once strained the industry have steadily diminished.
“Additionally, a decline in construction activity, particularly in the residential sector, has further alleviated demand-driven cost increases,” says Mr. Hannan.
“The labour market has also softened, with slower wage growth and reduced labour demand contributing to the easing of inflation. This reflects broader trends in the domestic economy, where tighter monetary policies and weaker demand conditions have created a more balanced cost environment,” adds Mr. Hannan.
The report also notes persistent challenges in some areas. Construction equipment costs have continued to rise sharply, creating ongoing upward pressure on costs.
“While some cost pressures persist, we anticipate that overall inflation will stabilise gradually and grow at more sustainable rates,” says Hannan. “However, global factors such as U.S. tariff policies could impact import prices, posing a risk to future cost trends.”
Macromonitor forecasts a 3.5% rise in total construction costs in 2025 and 2.2% in 2026, aligning with a gradual return to long-term growth trends.
Data from this chart is available upon request. Please contact Abdul Hannan at 02 9869 8844 or abdulhannan@macromonitor.com.au.
For more information about this report visit: https://macromonitor.com.au/new-zealand-construction-cost-trends/
Macromonitor is an Australian industry research and forecasting company with a commitment to providing high quality information to industry. We have a team of consultants with extensive experience in research and forecasting for the construction and related industries. Macromonitor provides information that is tailored to the planning and management needs of business. We provide multi-client subscription reports, commissioned reports and presentations.
