Easing construction expenses
The latest QV CostBuilder data revealed a moderate increase in construction costs across New Zealand's main centres, with the average cost to build a standard three-bedroom home up by 1.8% annually, marking a significant slowdown from previous years.
This quarter’s increase was a mere 0.3%, compared to 4.9% at the end of December 2023, and 9.5% in mid-2023.
Martin Bisset, a spokesperson for QV CostBuilder, commented on the trend.
“The rate of building cost inflation is certainly on the wane,” Bisset said in a media release. “This will be welcome news to all those who are currently contemplating or pricing up new building projects, especially at a time of such economic uncertainty.”
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Economic impact on construction
Bisset elaborated on the broader economic factors influencing the construction industry.
“Significant economic headwinds continue to blow, which has drastically reduced activity across the wider construction sector,” he said.
“For consumers, the upside of that is there are fewer capacity constraints and therefore less upward pressure on pricing. Contractors are having to put their best price forward in order to win work.”
Supply chain and market adjustments
Improvements in the supply chain post-COVID and stable fuel costs and interest rates contribute to the easing of construction costs.
“We’re also seeing that many of the supply chain issues that arose as a result of COVID-19 have now been rectified, with fuel costs and interest rates also sitting relatively steady for the time being,” Bisset said.
Government initiatives
The government is proposing changes to the Building Act to simplify and reduce the cost of building by accepting building products that comply with certain overseas standards.
“Anything that makes the cost of building cheaper will be a good thing, provided we also ensure the quality and reliability of the products and materials being used,” Bisset said.
CostBuilder update
CostBuilder, New Zealand’s comprehensive building cost platform, has updated its database with more than 12,500 current material and labour prices, reflecting minor changes in various construction elements. Notably, the costs for exterior walls/finish have seen the biggest increase since the last update.
Outlook on building costs
Despite the hopeful signs of stabilisation, Bisset cautions, “It’s important to remember these figures are only averages and the true cost of building will always be dependent on the level of finishes, internal layout, and all manner of other elements.”
For detailed building cost information, stakeholders and interested parties are encouraged to visit CostBuilder at costbuilder.qv.co.nz.
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