Residential building cost inflation continues to decline, according to the Cordell Construction Cost Index (produced by Cotality).
The Index tracks the costs involved in building a standard, single story, brick and tile house. The total costs rose 0.4% in the September quarter (Q3), down from a 0.6% increase in the June quarter (Q2).
The latest result was less than half the long-term building cost inflation average of 1.0% per quarter.
Annual building cost inflation over the 12 months to September was 2.0%, also less than half the 4.1% long-term annual average. It was 2.7% in Q2.
Building materials account for the biggest proportion of costs in the Index at 50%, followed by wages at 40% with the remaining 10% coming from professional services and other sundry costs.
While overall building cost inflation was down sharply in Q3, there was significant variation between components, with plumbing costs up 7% and gas-related products up 2%, while bathroom fittings declined by 6%. Roof tile and kitchen joinery costs were unchanged.
Cotality NZ Chief Property Economist Kelvin Davidson said the moderation in building cost inflation reflected a market that had worked through post-Covid bottlenecks and the extreme cost pressures of 2021/22.
"Materials are better supplied, wage growth has steadied and we're seeing more predictability in product pricing," Davidson said.
"Construction costs remain high in dollar terms, but the pace of change is much milder," he said.
"For builders and homeowners alike, that creates greater confidence in quoting, budgeting and delivery," Davidson said.
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3 Comments
Building costs going up but at a slower rate. What about the professional services including council, are these tracked, I doubt council is slowing their increases
We probably need costs going down rapidly for housing to become affordable again, vicious circles
Most councils pushed their development contributions right up in the last couple of years, which was the final nail.
My understanding and I do not have a definitive answer is that when 3 Waters was announced any accumulated development contributions that NPDC had was to be "handed over" to central government. All of a sudden there were no accumulated contributions and the funds moved by accounting methods and spent/to be spent on other projects. Now the development levy's have to be rebuilt. The councilors were either all complicit in this or my cynical look at things it was done without any councilors knowing about it or the one or two who did, on a nod and a wink basis. This naturally leads onto 3 waters being shifted to a Council Controlled Organisation (read wholly owned subsidiary) where the CCO can now charge and build up a kitty of their own accord while council still keep some or most of the development levy. I believe using a CCO for the 3 waters requires another board of directors and administrative structures that would not occur if the 3 waters was held within Council. It will end up that the sum of the rates and taxes without a CCO 3 waters will always be less than the sum of rates and taxes and a CCO 3 waters. It enables council with a 3 waters CCO to mask rates and taxes increases such that it appears to be lower because they don't have to include the 3 Waters cost to the ratepayers in their accounts. It's a case of the deep state, ie Council officials bamboozling your average councilor, the greater majority of whom can be easily bamboozled by accounting sleight of hand. The idea of a 3 waters CCO most likely sown by a National or ACT ideologue.
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