Building costs stabilise, offering relief for developers
In the latest QV CostBuilder quarterly update, building costs have largely stabilised, providing builders and developers with much-needed certainty in a post-pandemic environment.
The August report, which incorporates data from over 12,700 material and labour prices across key cities including Auckland, Wellington, Christchurch, and Dunedin, showed a modest 0.3% increase in the average building cost per square metre for residential buildings.
This mirrors the growth rate seen in the previous February and May quarters.
“This is good news for anyone looking to build right now,” said Simon Petersen (pictured above), QV CostBuilder spokesperson. “It will give them more confidence that the estimated cost of a project will indeed be in the same ballpark.”
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Non-residential costs show slower growth
Non-residential building costs also saw a smaller increase of 0.2% this quarter, marking a slight deceleration compared to previous quarters, which saw growth rates of 0.3% and 0.4% in February and May, respectively.
“Building cost inflation is returning to much more ‘normal’ levels,” Petersen said.
However, the QV spokesperson cautioned that global uncertainties, including potential geopolitical conflicts in regions like the Middle East and Ukraine, could still impact supply chains and, by extension, construction costs moving forward.
Material prices see mixed movement
The report highlighted notable changes in specific material prices, with the largest increase seen in interior doors, which rose by 0.9% due to higher hardware rates.
Sanitary plumbing costs also rose by 0.5%, driven by increased copper pipework rates.
Conversely, there were some significant price decreases, including a 5.7% drop in steel framing costs and a 4.5% reduction in suspended ceiling costs, attributed to lower panel and framing rates, QV reported.
Trade rates show stability with some exceptions
Trade rates increased by an average of 0.2%, consistent with the broader trend of stabilisation.
Hardware costs saw the most significant rise at 2.9%, while demolition rates also grew by 1.4%. However, the drop in steel and suspended ceiling costs offered some relief.
These changes in trade and material costs give builders more predictability in budgeting for upcoming projects.
Impact on builders and developers
The report provides crucial insights for developers and builders, especially those concerned about the fluctuating costs of construction materials and labour.
“We’re continuing to see building cost inflation returning to much more ‘normal’ levels,” Petersen said.
He added that while the current stability is promising, external factors such as global supply chain disruptions could still play a role in shaping future price trends.
Access the QV report in full here. Compare with the previous report.
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