Building prices exceed buying costs
For mortgage brokers working with clients considering new builds, the message is clear: building new often costs far more than buying an existing home.
While new builds come with modern features and lower maintenance, current market conditions have made this premium exceptionally steep, whether buying from developers or building on vacant land.
Comparing Costs Across Key Regions
Data from Trade Me and CoreLogic showed that building a typical 154sqm house on a 600sqm section in Auckland would cost about $1.5 million, assuming a build rate of $4,000 per sqm, RNZ reported.
In contrast, the median asking price for existing Auckland homes is around $986,750. Even with smaller land sizes, building costs still exceed $1m.
In Canterbury, costs are slightly lower but still significant, with a new build priced at $989,000 compared to a median existing home price of $688,200.
Economists warn of low incentive to build
BNZ chief economist Mike Jones (pictured above left) pointed out the widening cost gap.
“The median home price is just under $800,000, and new homes are just under $1 million. It’s quite a gap,” Jones said.
Construction costs have risen 30-40% while house prices have stagnated or fallen, making the financial incentive to build much weaker.
CoreLogic’s Kelvin Davidson (pictured centre) added that new builds from developers also carry a premium, with existing homes averaging $785,000 compared to $827,000 for new builds.
Land values and construction costs remain high
Brokers should be aware that high land and construction costs are key factors driving the price disparity, RNZ reported.
While land prices in Auckland and Canterbury have dipped slightly, house prices have fallen more sharply – 16.7% nationwide since their peak.
CoreLogic’s Nick Goodall (pictured above right) cautioned that the high costs make new developments less feasible, even as construction cost increases have slowed. The property market remains tough for those looking to build.
Limited bare land sales highlight challenges
The limited number of bare land transactions underscores the challenge of building new.
In the second quarter of this year, only 230 bare land sales were recorded in Auckland, 290 in Canterbury, and 79 in Waikato.
Developers are holding firm on land prices, making it harder for new builds to stack up financially against buying existing homes, RNZ reported.
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