The growth rate of construction costs in New Zealand has dropped below long-term averages, as the industry completes a wave of building consents and resolve COVID-19 supply chain disruptions.
CoreLogic’s latest Cordell Construction Cost Index (CCCI) recorded a 0.5% increase in the first quarter of the year, less than half the long-term quarterly average of 1.1%.
The annual change of 2.3% is well down on the peak of 10.4% recorded in Q4 2022 and is the lowest rate in almost eight years.
CoreLogic Chief Property Economist Kelvin Davidson said construction costs had spiked during 2022 due to lingering COVID-affected supply chain issues, as well as a boom in construction activity.
He said on a rolling 12-month basis New Zealand’s dwelling consents peaked at more than 51,000 in May 2022.
“Supply chains have normalised and house-building activity has pulled back, easing the pressure on capacity and therefore cost growth,” he said.
“Most costs have stayed relatively stable since the end of 2023 and the CCCI has recorded no significant movement across any particular product or labour rates, which can account for up to half the cost of a new build, excluding land.”
Mr Davidson highlighted the normalisation of construction growth rates would benefit both builders and consumers following unprecedented industry volatility, resulting in construction costs being 25% higher than pre-COVID levels.
“The industry is facing less pressure on workloads and the decline in new dwelling consents suggests this softer phase of construction activity may remain in place for a reasonable period,” he said.
“Flatter costs mean builders can price jobs more accurately, and consumers can be more confident that their final price won’t have spiralled by the time a job as been completed.”
“While construction costs or the price of new builds won’t get any cheaper the expected annual growth rate of 3-4% over 2024 means the cost to build won’t be spiking higher either.”
CoreLogic’s research, tracks and reports on materials and labour costs which flows through to its Cordell construction solutions to help businesses make more informed decisions, estimate rebuild and insurance quotes easily and, ultimately, appropriate risk effectively.
The CCCI report measures the rate of change of construction costs within the residential market for a typical, ‘standard’ three-bedroom, two-bathroom brick and tile single-storey dwelling.
To read the report, visit www.corelogic.co.nz/reports/cordell-construction-cost-index.
About CoreLogic
CoreLogic NZ is a leading, independent provider of property data and analytics. We help people build better lives by providing rich, up-to-the-minute property insights that inform the very best property decisions. Formed in 2014 following the merger of two companies that had strong foundations in New Zealand’s property industry – Terralink Ltd and PropertyIQ NZ Ltd – we have the most comprehensive property database with coverage of 99% of the NZ property market and more than 500 million decision points in our database.
We provide services across a wide range of industries, including Banking & Finance, Real Estate, Government, Insurance and Construction. Our diverse, innovative solutions help our clients identify and manage growth opportunities, improve performance and mitigate risk. We also operate consumer-facing portal propertyvalue.co.nz – providing important insights for people looking to buy or sell their home or investment property. We are a wholly owned subsidiary of CoreLogic, Inc – one of the largest data and analytics companies in the world with offices in New Zealand, Australia, the United States and United Kingdom. For more information visit corelogic.co.nz.
About Cordell Building Indices
The Cordell Building Indices (CBI) are a series of construction industry index figures that are used to monitor the movement in costs associated with building work within particular segments of the industry. The CBI indicate the rate of change in prices within particular segments of the New Zealand construction industry.
The changes in prices are measured daily through the use of detailed cost surveys, and are reported on a quarterly basis. This ensures the most current and comprehensive industry information available. Each index is based on a combination of labour, material, plant hire and subcontract services required to construct buildings within the particular segment being measured. The CBI measure the change in the cost of constructing buildings, and as such do not provide the actual costs.
