Material price surge could add $30,000 to new NZ Homes
Generation Homes, one of New Zealand’s largest home builders, has raised concerns about impending cost increases that could significantly impact new home buyers.
Recent price hikes across a variety of building materials, including cladding, insulation, plasterboard, and flooring, are expected to elevate the cost of constructing new homes.
These price increases range from 3% to 7%, potentially adding between $20,000 and $30,000 to the overall cost of a new home, RNZ reported.
Well-known brands like Pink Batts and James Hardie have already indicated a rise in prices, with Pink Batts insulation increasing by 4% and James Hardie cladding prices also on the rise. GIB plasterboard has seen a 3.9% increase this year, a change that builders had been alerted to last year.
Despite these increases, the latest data from QV CostBuilder showed that the start of this year has seen minimal changes in construction costs, with the average construction cost for a standard one- or two-storey home (150/230sqm) in major New Zealand cities like Auckland, Wellington, and Christchurch rising by a modest 0.4% this quarter.
Challenging market conditions
The price increases come at a time when the demand for new homes remains subdued, primarily due to high interest rates which have kept potential buyers cautious.
“When you’ve got clients who are trying to work within bank ratios and LVRs (loan-to-value ratios) and all the rest of it, you’re adding another twenty thousand to thirty thousand dollars to a mortgage. It really starts to have an impact on them,” Craig Hopkins (pictured), CEO of Generation Homes, told RNZ.
Supplier’s perspective
Fletcher Building, which supplies both GIB and Pink Batts, remarked that the price adjustment for Pink Batts was necessary due to inflation and rising electricity costs—the first such increase in two years.
They expressed a desire for price stability in building supplies but acknowledged that economic factors, including a weaker New Zealand dollar, inevitably affect costs.
“We are holding prices for as long as we can, but there will be times when we need to offset our cost-to-manufacture increases to ensure we can continue to deliver high-quality products,” a Fletcher spokesperson said.
Long-term solutions and industry outlook
While Hopkins understands the pressure on suppliers, he noted the complexity of balancing cost increases with consumer affordability.
He also expressed skepticism about the government’s initiatives to import more building products, pointing out the logistical and financial challenges involved in establishing an effective distribution network within New Zealand.
As the building sector navigates these rising costs, the potential for increased competition and international solutions might offer some relief, though these benefits are not expected to materialise immediately, RNZ reported.
The ongoing developments suggest that both builders and buyers may need to brace for an era of higher costs as the industry adjusts to the new economic realities.
