‘It’s gutting’: $500,000 home-build blowout
Scary times as the runaway costs of building materials cause alarm
ABay of Plenty couple has blown their dreamhome budget by $500,000 on a house that still isn’t finished after two and a half years. They are caught up in the building crisis in which house and land packages have jumped 20 per cent in a year. One company says a Tauranga home that cost $750,000 to build a year ago now costs $900,000.
Barry Grouby said he bought land at Lake Tarawera in 2011 and drew up plans in 2012 for their three-bedroom, two-storey home.
It then took years of “mindboggling” hold-ups and engineering issues before the floor went down about two and a half years ago.
“Then Covid hit and everything went on a slowdown. I got this house designed for myself, my wife and my three boys and now two of my boys have bought their own homes. I am 53 and I thought I would celebrate my 50th in the house.
“There has been so much stress and problems . . . it’s gutting.”
Grouby said the budget had blown out by $500,000 and he had new ovens, fridges and appliances still in their boxes that were bought a year ago.
He advised others to get someone to project-manage their build from start to finish, including consents and potential issues with the site.
He had not given up hope and had his fingers crossed tightly for an August finishing date.
“The location and view we have are absolutely amazing. My wife and I go out every Friday and stand on the deck — we used to stand on the dirt — but we are still struggling to see the end of the tunnel.”
A Tauranga woman, who asked not to be named, said her home build had been fraught with problems.
The $800,000 house she was building with family members had an expected finish date of September last year. This was pushed out due to Covid but they were still waiting on gib, which was ordered in January, and the site was at a standstill.
Their project manager had changed three times and although their contract was fixed, an escalation clause meant their budget had spiralled by tens of thousands of dollars.
“It’s an enormous strain. If we have to keep on paying rent while we build, I am not sure if we can afford to finish it. The stress is overwhelming.”
The NZ Institute of Quantity Surveyors has warned smaller building companies could collapse as issues plagued the industry, while the New Zealand Certified Builders Association said price escalation was occurring at an alarming rate and some materials were going up weekly.
Structural steel has jumped 64 per cent in one year, alongside a long list of other products, from metal framing up 48 per cent to fibre cement cladding at 32 per cent and reinforcement at 30 per cent.
New Zealand Certified Builders Association president Malcolm Flemming said price escalation was alarming, with supplier changes to product pricing sometimes changing weekly.
The inflationary pressures on materials and wages looked likely to continue.
“This increased cost of building, combined with the increased costs of lending and tightening of bank lending policies, will reduce the size of the pool of prospective people who are able to build a home.”
Classic Builders Group director Peter Cooney said the market had softened and buyers were taking more time to decide.
“Property prices soared last year with the lack of sufficient supply driving competition in the market which drove sale prices up, but that competitive edge has gone. We know that if our homes are priced well, then we will continue to be able to service the demand.”
The costs of construction had gone up at least 20 per cent in a year, he said.
The significant increase would impact residential, industrial and commercial construction, compounded by an additional $20,000-plus rise in costs due to new building code regulations.
Cooney said Classic Builders was still forecasting six months ahead and it planned to be as
proactive and responsive as possible, working together with its suppliers and subcontractors.
Venture Developments director Mark Fraser-jones said market conditions were challenging for homebuyers and builders.
“Obvious headwinds such as rising interest rates and supply constraints have drastically increased the price and ongoing cost of a new home to the consumer.
“These issues are set to be ongoing for the foreseeable future.”
The pipeline of houses sold and still to be built remained high. The ability to deliver the houses on time due to material constraints was a problem likely to continue into 2023, he said.
He expected prices to plateau somewhat in 2022 but did not see prices falling as the supply remained extremely tight and the Bay of Plenty was a desirable place to live.
Barrett Homes Bay of Plenty branch manager Lianne Simpkin said it had released a new subdivision in Domain Rd, Pa¯pa¯moa, that was selling quickly.
She said a fresh approach was urgently required to meet growth in the construction industry.
“We require a commitment to prioritise reforms to meet market conditions. The Government and the construction sector need to step up collaboratively to enable improved resilience in the industry.”
Stride Builders owner John Stride said these were “scary times”.
He built a house for a client last year for $450,000 and said it would cost $570,000 now.
Meanwhile, a young couple had to pull out of their new build due to material price increases of 40 per cent.
Stride said the company had moved its focus to higher-end architectural builds.
NZ Institute of Quantity
Surveyors president Martin Bisset said clients were having to pay a fair proportion of the build cost upfront just to secure building materials.
“Generally, banks do not start funding until works are on-site, so the client has to find the cashflow from their own pockets until construction starts on site.”
He said delays were prolonging projects but on a fixed-price contract, any additional on-site costs such as site management and scaffolding might not be recoverable from the client and “will eat into the builder’s profit”.
“With the collapse of Armstrong Downs in Wellington, it is very likely that smaller companies will follow suit, especially if they have entered into fixed-price contracts, with no way of obtaining increased material costs.”
All project designs landed on a quantity surveyor’s desk months before they were built, and it was their job to inform the client of the building cost perhaps a year or more into the future.
“In the past, this would be 2-4 per cent per annum, but now it is looking more like 15-20 per cent.”
Brendon Gordon Architects director Brendon Gordon said every project had its own set of parameters, challenges and outcomes.
He acknowledged the occasional project was being parked but the firm had an array of projects being worked on.
These projects included beachfront dream homes at Mount Maunganui, Tauranga waterfront new builds, Otumoetai gentrification sites and Whangamata¯ and Coromandel beach houses, Gordon said.