Building bills rise faster than inflation
High wages help push up the cost of construction, and the effect is most visible in the capital.
Building a new home continues to get more expensive, but an easing in building consents could bring the cost escalation to a halt.
Housing building costs rose on average by 3.5 per cent in the year to May, according to QV’s quarterly ‘‘costbuilder’’ report which monitors costs in the four main centres.
That outpaced annual inflation, which was running at 2.2 per cent in March, according to Statistics New Zealand’s consumer price index (CPI).
While Auckland and Christchurch were more expensive places to build, Wellington has the fastest growth in building costs this year.
The average cost of building a 140-square-metre, three-bedroom, one-bathroom house in the capital rose 2.43 per cent to $258,000.
Auckland costs were just a shade lower, up 2.32 per cent to $272,000, while in the South Island, Dunedin houses cost $245,000 to build, up 2.12 per cent.
Christchurch had the lowest residential construction costs at $277,375, a 1.92 per cent rise.
QV spokesperson Andrea Rush said Wellington’s costs mirrored its house prices, which had moved up more than 20 per cent.
‘‘Christchurch building costs rose by the least as the residential rebuild nears completion and demand is meeting supply for homes in the city.’’
Various other organisations also monitor building costs, sometimes calculating them differently.
In May, Colliers said residential construction costs were up 6 per cent in the past year, well above its long-term average of 3.7 per cent, as interest rates and labour costs crept up.
Another building information company, BCI Media, found that building costs for new dwellings were up 6.5 per cent higher in the March quarter than a year earlier.
The key reason was high labour costs, Infometrics chief economist Gareth Kiernan said. Hourly wages in the construction sector had risen 2.6 per cent on average from a year earlier, keeping consent values high in the short term, ‘‘even though the number of consents is expected to fall’’.
QV’s Andrea Rush also expressed concern that building consents were flattening across the country after peaking at a 12-year high mid-last year. The slowdown was in part due to stricter lending criteria from banks.
But it also reflected a sense that house prices had plateaued.
Despite that, the country’s population continued to grow, by 97,000 over the past year. It was a concerning trend when a pick-up in building was so urgently needed, Rush said.
Size-wise, QV found the largest houses had attracted the biggest cost increases.
Houses between 200sqm and 600sqm rose in cost by 3.39 per cent over the past year.
But Rush said it was important to realise the cost of building was averaged.
In reality, house costs varied depending on the level of finish and internal layout.
QV’s costbuilder data excludes the cost of land, demolition, building code change, additions like landscaping, GST, council fees and other costs. –Fairfax NZ