Diesel costs declined 18.9% in May but that wasn't enough to offset other price rises in the building industry with some costs increasing by 25% according to QV CostBuilder

Building companies appear to be caught between a rock and a hard place as costs keep rising while the volume of work available keeps falling.

According to QV's latest CostBuilder report, the average residential build cost per square metre increased 1.6% over the three months to the end of May this year, and 2.4% over the 12 months to May.

Non-residential build costs, which includes commercial buildings such as shops, offices and warehouses as well as public buildings such as hospitals and schools, rose 1% over the three months to May, and 1.8% annually.

However, there was also a surprising ray of sunshine in the report, which noted a substantial drop in the cost of diesel.

Diesel is a major cost for work involving heavy machinery, such as excavation work.

The report found diesel prices declined 18.9% over the month of May, albeit from a high base, but bringing some relief for those trades dependent on it.

That drop in diesel prices resulted in excavation costs declining by 5.1% in May, while the costs of piling work declined by 0.9% for the month. However, the drop in the diesel price was not enough to offset rising costs in other areas.

Some of the biggest price increases were for plumbing pipework, with polyethylene pipework prices rising 25.0% last month, while PVC drain, waste and vent pipework costs were up 21.6%.

Other components facing substantial price increases were cedar cladding up 21.0%, fibre cement cladding up 4.8% and ready mixed concrete up 4.1%.

"The steep price of fuel has obviously been the most pressing issue in recent months," QV CostBuilder spokesperson and quantity surveyor Martin Bisset said.

 "We've seen some of that pressure ease now, but diesel is still significantly higher than it was earlier this year and it remains highly volatile," he said.

"The broader picture is still one of modest cost growth overall,' Bisset said.

"Some costs have come back, but materials such as concrete, timber, cladding and pipework are still moving higher."

"Anyone planning a build should allow for some movement in costs. Even modest increases can make a difference over the life of a project," Bisset said.

That is coming at a particularly difficult time for the building industry, with Statistics NZ estimating the amount of work being undertaking across the industry has been in steady decline for the last two years.

Statistics NZ's latest Value of Building Work report estimates the value of building projects commenced in the first quarter (QI) this year was down by 5.9% compared to Q1 last year, with both residential and non-residential building project starts in decline.

You can read more about that here.