New dwelling consents back to 2018 levels - build costs stabilising

Property / analysis

Building costs stabilising except for retirement units, the average size of stand alone houses is shrinking

9th Aug 24, 10:24am by Greg Ninness

The residential building industry appeared to perk up slightly in the second quarter (Q2) of the year, after a period of steady decline.

According to Statistics NZ, 8279 new residential dwellings were consented in Q2, up from 7717 in Q1, bringing an end to three consecutive quarters of decline.

However numbers remain well down from the peak of more than 13,000 new homes consented in a couple of quarters in 2021/22.

And of course the slight uplift in consents that occurred in Q2 may not continue into Q3.

Overall, the number of new dwellings coming through the consenting pipeline appear to be back where they were in 2018, before Covid came along and threw a hammer in the works.

Another piece of welcome news is that build costs appear have stabilised after an extended period of substantial increases.

The average consented build cost across all dwelling types was $3273 per square metre (excluding the cost of land) in Q2. That's barely changed from $3276 per square metre in Q1, and also hardly changed from $3230/sqm in Q4 2023 and $3225/sqm in Q3 2023.

That means consented build costs have been more or less flat for the last year (to June), suggesting they have now plateaued after a period of substantial inflation.

Make no mistake, average build costs are still at all time highs, up 18% overall on Q2 2022, and builders will be struggling to keep them under control, but at least they are no longer increasing.

Size of stand alone houses declines

Another trend evident in interest.co.nz's latest Building Consent Analysis tables is that the size of stand alone homes is continuing to shrink, with their consents average just 180 square metres in Q2.

Over the last four quarters the average size of stand alone homes consented has ranged between 180sqm and 182sqm.

That's down from 215sqm when interest.co.nz first began compiling the figures in 2010. So over that period the average size of the stand alone houses consented has declined 35sqm (-16%).

The reverse is true for retirement village units, where the average size of the new units consented in Q2 increased to 133sqm, almost back up to the record high of 137sqm in Q1 2022.

At the same time the average consented build cost for retirement units jumped to a record high of $4160 per square metre in Q2, which was up a massive 78% compared to two years ago, and was the first time the average build cost has been above $4000/sqm.

That pushed the average build cost per retirement village unit to a record $551,909 in Q2, the first time it has been above $500,000, and up an astonishing 73% compared to Q2 2022.

However, the number of new retirement village units being consented stands in stark contrast to their increasing costs, with just 350 new units consented in Q2, a six year low and down 31% compared to two years ago.

Those suggest there is less growth happening in the retirement village sector, but what growth there is is being aimed squarely at the top end of the market.

Interest.co.nz's Residential Building Consent Analysis tables, track the changes in building consents by average size of dwellings consented as well as average build cost and cost per square metre.

The figures are available for all major dwelling types and regionally in the main urban districts.

To view them, click on these links for the national NZ figures, Auckland region, Waikato, Bay of Plenty, Wellington Region, Canterbury and Otago regions.

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67 Comments

by Pa1nter | 9th Aug 24, 10:36am 1723156566

Those suggest there is less growth happening in the retirement village sector, but what growth there is is being aimed squarely at the top end of the market.

If retirement consents are down, and unit sizes are up.

And new private dwelling sizes are down.

And the number of retirees is at all time highs.

You'd assume maybe retirees are eschewing retirement villages and building small houses for themselves (I've read a few places that boomer retirees are less enamoured with traditional retirement villages)

by JimboJones | 9th Aug 24, 10:49am 1723157357

Or maybe enough retirement villages have already been built in advance. It seemed to be a trendy investment for a while, much like AI now.

by Pa1nter | 9th Aug 24, 10:52am 1723157553

I don't know many that don't have waiting lists. Do we have any access to vacancy rates?

by JimboJones | 9th Aug 24, 11:04am 1723158260

Maybe those vacancy rates are based on prices from an era of much cheaper build costs. Might not be so many lining up with the prices a new facility would need to charge?

by Pa1nter | 9th Aug 24, 11:10am 1723158659

I feel they'd be relative, because most people going into a village are selling their existing home, which is also worth more than it was say, 10 years ago.

My gut feels (and I can be wrong) that boomers particularly - who are only just hitting an age that people normally move into a village, don't like the business model of a lot of the homes, and would rather live in a regular neighborhood than some hi-de-hi village.

by JimboJones | 9th Aug 24, 11:36am 1723160187

But "I don't know many that don't have waiting lists"?

by Frank. | 9th Aug 24, 12:12pm 1723162328

Or they can’t sell/get what they want for their existing house.

by Pa1nter | 10th Aug 24, 10:07am 1723241268

This is also a possibility. But it's that shrinking new dwelling size which would be interesting to know context of.

by rastus1 | 9th Aug 24, 11:24am 1723159447

Based on regular visit's to one that is new (been operating for maybe 3-4 yrs and still adding units) there are vacancies. Advertising by these 'homes' would indicate vacancies as well.

The trend to stay in the family home seems to be increasing. Reasons include high cost of retirement homes compared to free in home care. And of course poor your money into that big untaxed investment - your home.

As an aside, the big retirement home get a very nice tax break - so another tax payer funded tax advantage.

As per a previous post/page - another reason Gareth Morgan tax policy solves so much.

by J.C. | 9th Aug 24, 12:17pm 1723162655

As an aside, the big retirement home get a very nice tax break - so another tax payer funded tax advantage.

In that case, you would think that investing in companies like Ryman would be a proxy for exposure to the fruits of the Ponzi. The div yield for Ryman NZ is 0 at present. capital gain on the stock is down 70% since its peak in early 2020.

by rastus1 | 9th Aug 24, 1:13pm 1723166033

Where have you been? That has been the case for years. Understand how they are taxed and you will see for yourself. Deferral of income.

by J.C. | 9th Aug 24, 2:27pm 1723170441

The relationship between Ryman with the Ponzi is well correlated up to Q1 2020. What did I miss? Special tax treatment announcement?

by mfd | 9th Aug 24, 11:33am 1723159985

It seems that the listed companies have at least been slow to fill new builds, the vacancy of existing builds I'm not sure about. Certainly they have all slowed down development dramatically which suggests demand has been low.

The question is whether this is a temporary delay due to the weak housing market, or if demand will continue to be lower than predicted.

by Rampart | 9th Aug 24, 11:12am 1723158775

I’ve just installed 25K worth of ducted heating in a 5 bedroom house for a single lady in her 80s. She told me there’s no way she could will go into a home and will get full time live in care if required, hence the all round heating. Thank god for boomers. Keeping construction alive.

by bw | 9th Aug 24, 11:33am 1723160006

Good for her. But at the heart of our problem is "a single lady in her 80s" + "a 5-bedroom house". Yes, there's room for a carer/assistant in due course, but the wasted utility value of just this one case is spread across the suburbs of New Zealand. (NB: In many cases the elderly, especially on their own, have a carer that calls in, in the morning and at night, to do what needs to be done. eg: through Geneva Health Care "Live well and continue to enjoy living independently in your own home with personalised care and support").

by LouB | 9th Aug 24, 12:13pm 1723162389

For heaven's sake. It's her home. Possibly been so for 30 or more years.

I live alone in a 3 bedroom home, 69 years old. By your arguing, I should be moving into a 1 bedroomer?

by Nzdan | 9th Aug 24, 1:37pm 1723167432

We might be neighbors? A good school zone with parks nearby, good public transport access, 3 - 4 bedroom homes on 1/4 acre sections. Estimate 75%+ of my street occupied by retirees while the streets are clogged with double parked cars during morning and afternoon school drop offs.

Don't take offense to people pointing out how highly inefficient that arrangement is, nobody is suggesting dawn raids. You moving into a 1 bedroom place would free up a 3 bedroom home for a family though.

by LouB | 10th Aug 24, 2:56pm 1723258576

That's arrogance sorry. Anyway there's no congestion or parking issues where I live rurally in the back blocks of southern Hawke's Bay.

by Pa1nter | 10th Aug 24, 3:05pm 1723259141

Everyone's going to age out differently.

I can't begrudge someone who wants to remain in their family home, which they may have worked on and cultivated over decades.

Studies imply going into a home shortens your life span. And conversely, living an active life around you social group, working your own garden (and eating the produce), etc is the Hallmark of the longest lived, happiest people.

But, people get injured, or some just aren't interested/up to maintaining a larger property.

I think the longer someone can keep doing what they're doing, where they want to do it, the better.

by Nzdan | 11th Aug 24, 2:45pm 1723344333

Sweet, then again don't take offense. I don't think some old person living alone in a 3 bedroom place in the back blocks of Hawkes Bay is the problem or representative of the rest of the country.

Areas surrounded by schools, public transport and jobs being occupied by retirees who have no need for 2 of those and the third they don't pay for courtesy of a gold card is what we're talking about. Yes, I get there's sentimental value from a life time of memories in those homes and like I said not suggesting dawn raids on the elderly. We're just pointing out the wasted utility of these homes.

by agnostium | 9th Aug 24, 5:22pm 1723180962

If a bigger mix of housing had been permitted and not resisted by NIMBY's older people could downsize into apartments /bungalows /townhouses in the same suburb they had lived all their life.

by HouseMouse | 9th Aug 24, 7:50pm 1723189826

Nothing stopping that across wide swathes of Auckland now

by huttman | 9th Aug 24, 1:13pm 1723166022

I hope you didn't consider her being as waste.

by Zwifter | 9th Aug 24, 11:38am 1723160295

More money than brains there but when you are 80 you don't care I guess.

by AN Other | 9th Aug 24, 1:57pm 1723168645

Based on my experience of watching silent generationers deteriorate, she is likely to end up in a home at some point - either by being physically or mentally incapable of living in her own home. Having a 5 bedroom home that has just had ducted heating installed indicates wealth that will aid her living longer than the typical life expectancy.

When it gets to the point where she is assessed by medical professionals, she may find they will decide for her and she will then go to the first retirement village they phone that has a space. Having said that, the best solution is to hit the tipping point where moving in happens just before it is too late to choose, because it is definitely more expensive to live in a retirement village that live in your own home but often that honestly is no longer feasible (short of having a live in nurse/cook/cleaner/gardener).

by Let me be Frank | 9th Aug 24, 3:24pm 1723173860

If moved due to need of medical care, mental or physical then retirement villages are not an option....it will be a rest home, probably with (so called) hospital level care. Retirement villages do not cater for this group and specifically exclude them.

by AN Other | 9th Aug 24, 3:44pm 1723175071

Apologies, I was using a general term, but I've visited a few that do though - they have wards called "memory units" for dementia/Alzheimers sufferers and also have other levels of care (retirement level, hospital level - they are all euphemisms for those that cannot care for themselves).

by interesting1234 | 9th Aug 24, 3:31pm 1723174269

I feel like more people are choosing to downsize and prepare for the later years as time goes on and people see just how much stress, heartache and cost it is to move someone to a rest home and clear out their home when one passes or gets too ill to be able say no to going to the rest home if they wanted to.

by 26@Main | 9th Aug 24, 3:23pm 1723173826

I don't know much about "homes" for elderly folks but maybe some of them need to visit a few and have a look around. I was at Bethlehem Shores in Tauranga recently and 5 star resort is a better description than home or retirement village .. "attractions include a café, 50-seat movie theatre, dance floor, billiards room, piano bar and cosy library with its magnificent schist stone fireplace. The health spa includes a 20 metre heated indoor swimming pool, spa pool, gym, hairdresser, plus rooms to enjoy exercise classes, and hobby rooms". I reckon there are plenty of young people that wouldn't mind living in something like this if they could afford it, 2023 prices started at 1 million for a 2 bed, 2 bath with garage.

by HouseMouse | 9th Aug 24, 3:35pm 1723174520

My father is in a Ryman village in Wellington and it’s really nice!

Financially he was lucky. He sold his house not far off the peak of the market for $1.3 million, and bought the retirement village apartment for 600k. The equation is probably $1 million and $750k now, a massive difference. No doubt this is one of the key reasons for the slump in construction

by 26@Main | 9th Aug 24, 7:22pm 1723188131

Great timing and a bonus to have that big buffer of money left over. Out of interest do you know what the weekly fee is for the independent living and/or serviced apartment living?

by HouseMouse | 9th Aug 24, 7:56pm 1723190211

Independent living, and I think about $140pw.

includes rates, ground maintenance. Doesn’t cover electricity

by Flying high | 9th Aug 24, 9:56pm 1723197386

Its so weird thay they pay the rates but do not receive capital gains

by Pa1nter | 9th Aug 24, 10:02pm 1723197723

Usually they take 30% of your original purchase price when you leave, and onsell it for current market value.

by HouseMouse | 9th Aug 24, 10:06pm 1723197988

For my dad’s place, they take 100k of the 600k.

by Flying high | 10th Aug 24, 9:34am 1723239283

I thought that it is 30-33 percent like what painter said, that would be 200k

Its also weird that while house values are dropping RV pricing has increased. Closing the gap for retirees but at least your father has money to spend

by HouseMouse | 10th Aug 24, 10:09am 1723241395

Nope. It must vary

Ryman 20%, so 120k for him

https://www.rymanhealthcare.co.nz/ryman-news/the-real-cost-of-retiremen…

by HouseMouse | 9th Aug 24, 10:05pm 1723197936

Oh well, I guess the village operator receiving the capital gains is a key reason for the success of the model. If I compare my dad’s place to the grot of his mother’s retirement home back in the late 80s (and hers was one of the ‘better’ ones), there’s no competition. I do think taking 100k from the 600k upon a resident’s passing is somewhat of a rort. But once again I guess central to the model working

by 26@Main | 10th Aug 24, 11:20am 1723245603

Cheers HM, thanks also for the useful link you posted further up. I think that weekly fee is reasonable, I also think the $120k they charge on sale is ok too, as you say it's part of the model and if they didn't charge it these places might not exist. I can see heaps of benefits to villages like peace of mind for family especially if like you they live in another city, the social interaction side which is important especially as people age, not having to deal with maintenance issues on a property and potentially being ripped off by unscrupulous tradies, and the feeling of security older people must have living there, you can't put a tangible price on these things but they're valuable. If I'm lucky to make it to old age I don't think I'll be sitting around worried about losing out on capital gains on whatever four walls I have around me, at least I hope not anyway.

by HouseMouse | 10th Aug 24, 11:40am 1723246844

Yes he / we are very happy with it

by AN Other | 9th Aug 24, 3:53pm 1723175600

Absolutely! I have an 89 year old relative that has just moved into a new Summerset (so new they are still building the second half of it) and it is fantastic. Fortunately he had just enough to buy the Right to Occupy of an Assisted Living apartment and his various pensions more than cover the weekly costs charged.

Plenty of people will struggle to afford it, not helped by the business practices that successive governments look at with suspicion (still no interventive though), but I'd be lying if I said I hadn't thought of moving in early (which is probably why the operators have increased the minimum age of occupants).

by Flying high | 9th Aug 24, 5:01pm 1723179697

Let's be clear, people in their 80s are not boomers

by The Person | 9th Aug 24, 10:43am 1723157017

How dare the free market deliver north korean style 'smaller houses'. This is a holdover from Labours nanny state social engineering. The new govt must mandate 300sqm+ for new builds, otherwise they are destroying the kiwi way of life.

by Timutei | 9th Aug 24, 10:41am 1723156863

Where is the analysis of why the costs to build have risen ? Is it labour? Is it materials ? Where has that extra money been drained ?

by Pa1nter | 9th Aug 24, 10:48am 1723157333

It's both of those and extra regulation.

Takes longer to build, materials now cost more, there's less tradies.

by JimboJones | 9th Aug 24, 10:50am 1723157451

Worldwide though isn't it? I watch some property do-up shows, it feels like the American's and British have seen much bigger increases than us.

by Pa1nter | 9th Aug 24, 10:53am 1723157614

I was in Germany recently, and some trades can make 120,000 Euros a year on wages.

So yeah nothing really unique.

by agnostium | 9th Aug 24, 5:25pm 1723181139

Bollocks.

by Pa1nter | 9th Aug 24, 9:16pm 1723194979

The right trade in NZ can make a couple hundy a year without breaking too much of a sweat. But that's as a subcontractor being paid by the meter, this was wages.

Salary estimates based on salary survey data collected directly from employers and anonymous employees in Munich, Germany. An entry level general contractor (1-3 years of experience) earns an average salary of 75.142 €. On the other end, a senior level general contractor (8+ years of experience) earns an average salary of 133.855 €.

I know a plumber in Long Beach with a McLaren and a Bentley.

by wingman | 9th Aug 24, 10:57am 1723157872

Does this mean that the building industry isn't collapsing, and Great Depression 2 as predicted here daily, is off?

by Pa1nter | 9th Aug 24, 11:01am 1723158105

It really just means things are normalizing.

But if crowds are structured for the volumes of the last few years, they're going to be doing it tough.

by Zwifter | 9th Aug 24, 11:36am 1723160206

It means there will be yet another housing shortage down the line when things pickup again. Probably a shift to more 3 bedroom houses being built, 4 bedroom is not really necessary.

by JimboJones | 9th Aug 24, 11:41am 1723160460

4 beds are good for families with 2 kids and a spare room / office.

by Zwifter | 9th Aug 24, 12:23pm 1723163010

Only if you get decent size bedrooms. Better off with 3 decent ones than 4 that are too small. A 4 bedroom place needs to be like 200sqm or else one or more of the bedrooms is only an office anyway. These days I just sit with a laptop at the breakfast bar, no need for an office. If house sizes are trending down then 3 bed will become the norm. With the right layout and not wasting space on things like a hallway, 175sqm is plenty.

by tis i | 9th Aug 24, 1:17pm 1723166226

Are you including garaging?

by Zwifter | 9th Aug 24, 2:47pm 1723171660

Yes, I have an oversize double with plenty of room to the side for a laundry and a fully equipped electronics workbench.

by Grattaway | 9th Aug 24, 4:03pm 1723176219

This is the bit I dont understand as it is ridiculously expensive car parking when car is designed to be outside. Its been 20 years since I parked my vehicle in a garage

by Zwifter | 9th Aug 24, 5:08pm 1723180096

Sorry, your car is not designed to be parked outside. If you have a decent car you park it in the garage, if you have a pile of junk or a cheap 20 year old second car like me you park it outside.

by agnostium | 9th Aug 24, 5:28pm 1723181288

Have you done the sums on where the break even is on paying for a garage vs increased deterioration from parking outside. In central city areas it only makes sense if you have a very very very nice car.

by General Comment | 9th Aug 24, 1:44pm 1723167885

I guess it depends on your home office requirements. Mine has 4 monitors, 3 laptops and two printers in it, as well as a charging station for phones, tablets and handheld radios, in a dedicated 3.6m x 3.6m room. Then again it's effectively a 24x7 workspace rather than an occasional one, so comfort is key.

by Zwifter | 9th Aug 24, 2:49pm 1723171766

Probably a bit overkill for most people. My laptop and charger go into the kitchen draw and cupboard when I go out or when I'm not using it so the "Office" is invisible.

by huttman | 9th Aug 24, 11:06am 1723158372

The average consented build cost across all dwelling types was $3273 per square metre

what is the actual building costs? is there much difference between real building costs to consented costs?

by Pa1nter | 9th Aug 24, 11:08am 1723158528

The real costs are usually higher. Plans get changed, somethings overlooked, etc.

by JimboJones | 9th Aug 24, 11:39am 1723160385

Is that the pointless cost estimate you put in when you apply for consent? Our architect said it was better to put a low value as it made the project seem less of a deal, so we put in less than half what it actually costed.

by ChrisOfNoFame | 9th Aug 24, 11:41am 1723160507

Consented costs are usually kept as low as is believable. Many Councils calculate fees, charges, 'contributions', etc. based on the 'consented cost'. Ergo, they are always less than the actual cost - sometimes substantially so.

by interesting1234 | 9th Aug 24, 12:32pm 1723163561

They're crooks in this regard. Try telling them you'll be doing some of the work yourself and they'll charge the consent adding in the estimated cost of the going hourly rate for every trade supposedly needing involved. And they wonder why nobody wants to get the council involved unless they absolutely have to.

by IT GUY | 9th Aug 24, 3:18pm 1723173515

During the GFC a builder fell over and I got 3 velux skylights for next to nothing, I put them in myself.

looked at council approval and it was like $2.5k.... vs the $800 for the units at auction. Nuts

so later on when we where doing an addition of an ensuite, i added that velux work to the drawings etc etc, the cunning old inspector smiled at me and said.... I would be willing to bet they went in a while back, and signed off the work.