Residential construction costs are rising as the building industry shows signs of recovery.
According to the Cordell Construction Cost Index, published by property data company Cotality, residential building costs increased by 1.0% in the March quarter (Q1) of this year, following a 0.9% increase in the December quarter (Q4) last year.
That pushed the annual pace of cost growth to 3.0% in Q1 this year, up from 2.3% in Q4 last year.
That's the steepest increase in annual costs in two and half years, although it remains below the long term average of 4%.
"The annual rate shows cost growth is starting to find some upwards momentum again," Cotality NZ Chief Economist Kelvin Davidson said.
"That increase represents a gradual pickup in activity, with more projects progressing. which has placed renewed pressure on parts of the construction cost base," he said.
Increases were recorded across a range of materials and finishes, including a 12% lift in the cost of masonry, 5% for wallpaper, 4% for LED lighting, while there were cost declines in plumbing-related products such as PVC piping and bathroom fitouts.
"We're not seeing widespread cost surges, but enough inputs are rising to push overall costs higher," Davidson said.
"That's consistent with a market where demand is returning and capacity is starting to tighten again at the margins," he said.
Davidson said global uncertainty and higher fuel prices stemming from the current US-Israel-Iran conflict were already beginning to filter into the supply chain, with some suppliers signalling potential price increases.
"For the construction industry, this will be a challenging period as firms adjust to higher fuel prices just as activity is starting to recover," Davidson said.
1 Comments
The oil derivatives complex.
So much commentary on this oil shock has limited the focus on the price of fuel at the pump and it's impacts on the processes that rely on liquid fuel, and a bit on fertiliser, with little commentary on the impacts it has for the massive complex of crude derivatives that are critical components to everyday life as we've come to expect over the last 50+ years. Things like plastics, in packaging, single use medical consumables, plumbing, floor coverings, upholstery, paints, insulation, seals, cosmetics, etc. Its a very long list.
Adaptation planning requires much broader thinking than food self sufficiency, solar energy, fleet electrification.
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