Home building costs rise 1.5% annually amid easing inflation
Residential construction costs in New Zealand increased by just 1.5% in the 12 months to November 2024, marking the slowest annual growth since QV CostBuilder began tracking data in 2015.
The latest figures show a stabilising trend after years of significant volatility, with smaller increases recorded compared to the 5.6% rise in 2023 and sharp spikes of 11.3% in 2022 and 18.9% in 2021.
Martin Bisset, quantity surveyor at QV CostBuilder, highlighted the shift in construction trends.
“After four years of pronounced volatility, construction costs have been significantly more stable in 2024. This is reflective of inflationary pressures continuing to ease at home and abroad,” Bisset said.
The quarterly data showed construction costs rose 0.6% in the latest period, a slight uptick compared to 0.3% in previous quarters but still a far cry from the rapid increases seen in pandemic years.
Key drivers: Stability returns to the market
Bisset said that many factors were responsible for the sharp cost surges in recent years, such as supply chain disruptions and rapid population growth, have eased.
“Record low interest rates are long gone, house prices have generally been on the wane for some time, supply chains have been re-established, and population growth has slowed,” he said.
While the residential construction industry still faces challenges, including weakened demand, Bisset pointed to falling interest rates as a reason for optimism in 2025.
Non-residential construction also sees limited growth
The cost of non-residential buildings (excluding educational facilities) increased 1.4% in the year to November 2024, including a 0.7% rise in the latest quarter. These figures indicate a similar trend of stability across the sector.
Bisset noted that costs are highly variable depending on design choices and building specifics.
“The cost of building will always depend on the level of finishes, internal layout, and all manner of other elements,” he said. “For example, whether or not a home has a single or double garage will obviously have a significant impact on its cost of construction.”
Material and labour costs show mixed trends
The QV CostBuilder report, which applied 23,100 updated prices to its database of more than 60,000 rates across major centres, revealed mixed trends for materials and labour. Notable movements include:
- Site preparation costs fell 1.2% due to reduced steel sheet piling rates.
- Framing costs dropped 0.7%, while exterior wall and ceiling finishes increased 0.8%-1.2%.
- Structural steel prices declined by 1.7%, but steel framing rose significantly by 4.7%.
- Suspended ceiling costs climbed 5%, driven by rising prices for panels and grid systems.
Outlook for 2025: Stability with opportunities
The latest figures paint a picture of a stabilising construction industry after years of price surges. While challenges remain, such as reduced demand, easing inflation and falling interest rates may pave the way for a more optimistic outlook in 2025.
As the industry adapts, access to accurate cost data, like that provided by QV CostBuilder, will be crucial for builders, developers, and homeowners to make informed decisions in a changing market.
More about the cost of building a home on the QV website.
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