The figure halves quarterly but hits annual record, CoreLogic data shows
The residential building sector recorded 1.7% inflation in the final quarter of 2022 – that’s half the 3.4% increase recorded in the three months to September.
This was according to CoreLogic NZ’s Cordell Construction Cost Index, which also found that the annual CCCI figure hit a new high of 10.4%, surpassing the previous record of 9.6% set in the third quarter of 2022.
Kelvin Davidson, CoreLogic chief property economist, blamed the surge in new builds, materials supply issues, labour shortages, and completion delays for the unprecedented increase to the cost of residential construction throughout 2022, NZ Herald reported.
Davidson said reduced inflation in the December quarter points to a changing trend.
“For most of 2022, new dwelling consents have remained high, with smaller dwellings, especially townhouses, becoming an even higher share of the total nationally 56% in the year to October, and 77% in Auckland,” he said. “But the very latest data is finally hinting at the long-awaited slowdown, with October’s dwelling consent figure itself down by 12% from the same month a year ago.”
The CCCI growth figure is measured based on the cost to build a standard 200sqm three-bedroom, two-bathroom single-storey brick and tile house.
Annual inflation for construction costs is expected to hold at around 10% for this year’s first quarter, Davidson said, before easing during the rest of the year.
Declining values, shown by sales data, however, might change that.
“However, in a market where existing house values are dropping, it may well be difficult for builders to keep pushing up new-build prices to compensate for higher costs,” Davidson said. “If so, the net result of continued increases in construction costs, even if at a slower pace, would be further pressure on construction firms’ profit margins.”
He said annual new dwelling consents could fall from around 50,000 annually to around 30,000 to 35,000 in the longer term.
In the year to September, 50,732 consents were issued for new dwellings – that’s up 7% annually, StatsNZ data showed. Over that period, new dwellings consented were:
- 21,985 in Auckland, up 11% annually
- 4,915 in Waikato, down 3%
- 3,819 in Wellington, up 10%
- 6,902 in the rest of the North Island, down 10%
- 8,718 in Canterbury, up 18%
- 4,392 in the rest of South Island, up 11%
NZ Herald reported in August that new housing consents granted nationally surpassed 50,000 for the fourth consecutive month but a survey showed weakening confidence from builders and architects.
According to the Construction Industry Confidence Report, 59% of builders and 46% of architects expected the sector to deteriorate – this despite StatsNZ’s data showing continuing record numbers of new housing consents issued.
In March 2022, new housing consents breached 50,000 for the first time, hitting 50,964. Consents issued to new houses numbered 50,688 in April, 51,015 in May, and 50,731 in June, NZ Herald reported.
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