Construction cost increases remain mostly modest, but a sharp rise in fuel prices is causing upward pressure in the short term.
CostBuilder is New Zealand’s most comprehensive online subscription-based building cost platform. In its latest monthly update, more than 11,000 current material prices were applied to its extensive database of construction rates across Auckland, Hamilton, Palmerston North, Wellington, Christchurch and Dunedin.
The update shows overall cost escalation remains relatively contained, with elemental and trade rates both increasing by an average of 0.4% in a month.
However, rapidly rising diesel prices have begun to flow through into construction costs, particularly in fuel-intensive areas of work.
At a trade level, excavation recorded the most significant increase, rising 7.8%, while piling (1.4%) and demolition (1.3%) also increased – largely due to the recent surge in diesel prices.
Site preparation and substructure costs also increased by 2% and 1.8% respectively due to rising diesel rates, with exterior works up 1% in a month.
QV CostBuilder spokesperson and experienced quantity surveyor Martin Bisset said fuel was the key cost driver currently.
“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.”
The rise in fuel costs comes amid increasing global oil prices linked to conflict in the Middle East, which is also affecting supply routes and lifting freight and energy costs internationally.
Mr Bisset said that while the recent fuel spike was significant, its full impact on overall building costs was not yet clear.
“New Zealand is particularly exposed to changes in fuel and shipping costs, so recent geopolitical events in the Middle East are relevant for the local construction sector, and they will inevitably have an effect,” he said.
“At this stage, we can see the effect at a trade and elemental level, but the impact on total building costs per square metre hasn’t yet been captured. We expect to have a clearer picture of that in our next CostBuilder update.”
In the meantime, he said the current environment differs from the sharp and sustained cost escalation experienced during the Covid-19 period.
“We’re not seeing the widespread supply chain disruption of recent years, but fuel and freight are certainly re-emerging as important cost drivers.”
“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.”
More broadly, construction cost movements remain mixed. The latest update also recorded increases in materials such as plasterboard, insulation and some timber products, while some copper and steel pipework declined in price.
Mr Bisset said the market remained relatively balanced overall, but with a higher degree of uncertainty.
“The key takeaway is that cost growth is still relatively moderate, but volatility has increased,” he concluded.
Visit QV CostBuilder at costbuilder.qv.co.nz.
