The number of new homes being consented has nosedived by more than a third over the last two years, but the cost of building them is still increasing, according to interest.co.nz's latest analysis of Statistics NZ's residential building consents data.
This shows 7717 new dwellings were consented throughout the country in the first quarter (Q1) this year, down from 9720 (-20.6%) in Q1 last year, and down from 12,333 (-37.4%) in Q1 2022.
At the same time the average estimated cost of building those homes has continued to rise.
The average estimated build cost (excluding land) of new dwellings consented in Q1 this year was $462,654, up $21,978 (+5.0%) compared to Q1 last year, and up $68,100 (+17.3%) compared to Q1 2022.
The increase in building costs is not due to any increase in the size of new homes, in fact the opposite is true.
In Q1 2010, the average size of new homes consented was 202 square metres, and had steadily declined to 141 square metres in Q1 2024. That means the average size of new homes has declined by 61 square metres (-30%) over the last 14 years.
In the last two years, from Q1 2022 to Q1 2024, the average build cost has increased from $2695 per square metre to $3276 per square metre, up by 21.6%.
Similar trends are evident around the country, although there are regional differences in building costs.
Interest.co.nz analyses building consents by major dwelling types - houses, units/townhouses, apartments and retirement village units, in each of the main urban areas of Auckland, Waikato, Bay of Plenty, Wellington, Canterbury and Otago.
This shows the average build cost (excluding land) across all dwelling types in Q1 this year, ranged from $2867 per square metre in Canterbury to $3960 per square metre in Otago, with Auckland pretty much in the middle at $3328.
The tables showing the full quarterly consent analysis by major urban region and dwelling type, going back to 2010, are available on our Residential Dwelling Consent Analysis page.
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65 Comments
No real surprise in that number in this economic environment and that cost per sq m
So how many are actual new houses, and not just replacements for old shitters being demolished?
You need about 3 houses per 1,000 pop. for replacement, we are about 7 per 1,000 I think, so a net increase of 4 per 1,000.
???
If the population grows faster than the houses being built, what will happen to house prices?
Yup. History repeats, we learn nothing
If the population grows faster than the houses being built, what will happen to house prices?
Good question. Using System 1 thinking, they go up right?
Please respond under System 2 thinking then
The average number of occupants per house rises
Also, the number of people on the street increases.
Yes sadly, society's drop outs
McMansions become guest houses. And then made into flats. Houses get smaller (and cheaper and more get built).
We become sardines. And we're all extremely happy.
Please respond under System 2 thinking then
OK. It is counterintuitive to think that house prices would not increase if popn growth were greater than housing supply.
Its counterintuitive but also in ... (insert descriptive)
Using System 1, you would probably use a word like 'reality.'
But what if you're wrong?
That's if that happens. There seems to be a lot of defections happening at the moment and birth rates are dropping fast.
They might go up, they might be flat, they might go down. Because there are many factors at play beyond population growth and the numbers of houses built.
Population growth increased massively over the past two years, and prices dropped.
There you go. Sorry your spruiker bias has not been confirmed.
Always play catching up is the name of the game. Never enough houses to meet demand, forget about the price, rent will go up and will be on per room basis.
Just the start another 50% to go yet this won't be pretty.
'In Q1 2010, the average size of new homes consented was 202 square metres, and had steadily declined to 141 square metres in Q1 2024. That means the average size of new homes has declined by 61 square metres (-30%) over the last 14 years.'
Greg, if you are doing it just for clickbait, it's working.
But to present the data like this at the same time saying building costs are going up is just reporting everything out of context.
Point 1. As soon as a garage (usually double) is attached as it is in larger standalone builds it is counted as part of the m2. So as more townhouses and apartments are built with carports or no garaging, then the m2 is artificially brought a lot lower.
Point 2. Smaller units also cost more on a $m2 basis, especially apartments.
You are hardly comparing like for like.
Greg's comparison is valid and fine.
Explain why.
Yes good points
This shows the average build cost (excluding land) across all dwelling types in Q1 this year, ranged from $2867 per square metre in Canterbury to $3960 per square metre in Otago
Is this same for same, why the huge difference for adjacent regions
Guessing Otago includes Central Otago, Queenstown Lakes District which includes Wanaka etc. and nothing much happening elsewhere ie Dunedin.
Check out the apartments for sale in St Clair - $1,850,000.00
"...across all dwelling types..."
Overweighted on multi million $ bespoke mansions in Queenstown and Wanaka vs 3 story multi unit townhouses in ChCh
A couple of years back there was demand for small and brand new student accom in dunners. More students want to actually study instead of party up with a group of others in an old home.
There were builders and developers meeting the demand, is that still happening.
Sort of - new halls of residence have been built for both the Polytechnic and the Uni but, judging from the cost of rents in Dunedin's fairly dire rental flats, there's still a lot of demand and most of the halls are occupied by first year students.
The inability of landlords to be able to advertise student flats for incoming students (thanks to Labour's tenancy law changes which eliminated fixed term leases) to rent has meant a lot of student flats transitioned to non-student flats. This left only the most run down properties available to let, and for much higher rent than before as the landlord now has to cover a long summer vacancy period.
In Wanaka the going hourly wage rate for qualified carpenters is 45 dollars an hour. Cause of the cost of living in the lakes district. I know first hand as was just talking to a couple of builders here in Cromwell. So the cost of everything here is higher
Wished we could get get builders in Auckland for $45.00 per hour.
Try $75-$95 per hour in Auckland.
Thats why the Building Market is stoping it an affordability issue.
Same as housing market not a supply issue any more but affordability issue.
All self created by greed in the market.
Wages not charge out. Quick look on trade me shows Carpenter jobs for between $24 and $45 wages, but if there's a wages job for $95 an hour as a Carpenter I'll be on the next flight.
Tezw21
Be you own Boss or contractor if you are any good in Auckland they are been paid $95.00
I know I have been paying bill for last 6 months.
At $95 charge out you're still only earning around $45 - $55 an hour wages, so taking on a lot of extra risk for very little reward
That's wages not charge out. Difference is holiday pay public days off kiwisaver etc etc. Charge out rate or self employed alot higher
Not only Queenstown lakes: Dunedin is a relatively poor town that's become an expensive place to live in and build - likely because of proximity to the Lakes' higher wages, easier development and policy interest in development.
In Wanaka the going hourly wage rate for qualified carpenters is 45 dollars an hour"
Why is that rate so incredibly low, I would have thought Wanaka would be much higher.
Yvil that's wages show up put your pinny on knock off go home holiday pay acc paid kiwi saver paid. Charge out rate late 90s an hour.
Yet the average sqm house in the UK is 71 sqm. So half the size so when people say houses are cheaper in the UK that's the reason. Apples to Oranges
Where did you get that figure from?
Average size is 94m^2
Detached are 145m^2
Mr Goggle average house size in UK
Ah,... unfortunately Mr Goggle lies 🙃
So false economies compare a detached house price UK to a detached house price here with 4brms dble garage. Not a two room wide by two storied house in a concrete jungle (my English wife's version) to one of our stand alone houses and you will find our costs are very similar.
If you say so. I wasn't saying anything about costs, just thought 70sqm sounded very low
Absolute nonsense..
You can buy a house (bricks/mortar and slate) in a provincial town with easy access to the same amenities of Auckland on a decent sized piece of land for half the price you can over here.
Will be still standing in a few hundred years with only minor maintenance as well...
I'd like to know who's building houses for $3276 per square meter. Even a fairly average house would cost double that these days!
Very much depends on location. In Manawatu we build a 195m2 4 bed 2 bath double int. access garage complete with floor covering for $502,000.00inc gst. Excludes land, fencing, landscape & exterior concrete.
I would suggest it also depends on design, detailing and materials chosen.
So you're suggesting an AVERAGE 141 m2 house will cost $923'000 to build, excluding the finishes, landscaping, professional fees and the land. Yeah... nah.
No, I was including finishes and professional fees. Would be very hard to come in under $5,000/sqm for the complete project excluding land even for a pretty standard build.
The ultimate outcome of this will be higher property prices.
And we keep importing people like it's going out of fashion.
Do our governments - of any type - still have any interest in managing the country for the benefit of the inhabitants, rather than for short-term expediency?
My prediction was down by 40% from peak, getting very close. I must add that this prediction was laughed at by a number of economists and government officials I interacted with 1-2 years ago in various forums. Most thought 15-20% down, max.
Mind you, 40% will likely be too low, could easily be 50%+
Said goodbye to 7 people from one section of a company last week, other divisions saw same numbers so perhaps 50 from 500 gone.... OK perhaps 50% close to retirement so no mortgage but some not so much.... If what I am seeing and hearing H2 2024 will see a lot of people struggling to pay mortgages and perhaps even if not mortgagee sales, may be choosing to downsize out of AKL.....
"My prediction was down by 40% from peak, getting very close."
Just to clarify, that's for the number of houses being built, right? (which is the topic of this article)
The number of houses being consented. I was saying that 1-2 years ago when these articles attracted about 3 comments, rather than 50+.
I think the number of houses being built will fare even worse. Why? Because there’s still plenty of misplaced hopium out there, and a speculative element to a certain proportion of proposals getting consent.
Yes, people think they are getting a bargain because the price is only 5% less, or the developer offers low or no deposit.
Once the debt is locked in, then there is no respite even if prices keep dropping.
Hindsight is a great thing, but a bit of foresight is very helpful, not that it might change the decision you would have made, but at least you go in with eyes more open.
I just can't see house prices decreasing notably with a replacement cost in excess of $3500/m2.
It’s a minor influencing factor
Thanks for this very good analysis, Greg.
Those average build costs are a joke. Everyone knows they are a rort. Add at least 30% to those
Are those build costs to the developer / builder? Or the end purchaser?
The build costs quoted are from building consents data collected by Stats NZ. That’s just the cost to build, not the sq m cost to the end purchaser.
the quotes are kept artificially lower to keep council fees lower. I am saying the true costs are about 30% higher
Build costs increasing at over 10% per year represent true underlying inflation and are consistent with rent increases, increases in food, cost of eating out, insurance costs etc.
Property can't sell below replacement cost for long. The fair value of housing when rent increases and inflation are running at 10% and mortgages are at 6% is higher than most realise. Property is not the bubble many think it is when money supply and deficit spending are devaluing currencies this fast, resulting in real yields of -4%.
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