New Industry Data Shows Rising Costs

Author: Ben O Connell

Stats NZ data shows that the volume of building work was $8.3 million in the March 2024 quarter, down 4.0 per cent from the December 2023 quarter.

Construction and property statistics manager Michael Heslop said, “The total volume of building work in the March 2024 quarter was the lowest quarterly volume in the past two years.”

This $8.3 million figure is seasonally adjusted, a volume estimate that removes the effects of price changes and typical seasonal patterns.

“The fall in building activity coincided with a 2.8 per cent decrease in the retail sales volume of hardware and building supplies in the March 2024 quarter,” Heslop said.

“The fall in residential building activity reflects the decreasing number of building consents for new homes in the construction pipeline.”

 

Further Figures Show Rising Costs

The annual number of homes consented peaked in the year ended May 2022 and has been decreasing since then.

The value of building work put in place was $36 billion in the year ended March 2024, up 3.8 per cent from the year ended March 2023.

“The annual value of building work in the year ended March 2024 was up, but this also includes the increase in construction costs over this period,” Heslop said.

In the last year, residential construction costs increased by 3.9 per cent, and non-residential costs increased by 4.6 per cent.

The latest QV Cost Builder statistics show that the average cost of building a standard three-bedroom home in New Zealand’s main centres has increased by 1.8 per cent annually and by just 0.3 per cent this quarter.

This compares to an average increase of 4.9 per cent in the year ending December 2023 and 9.5 per cent in the year ending June 2023.

“The rate of building cost inflation is certainly on the wane,” said QV Cost Builder spokesperson Martin Bisset.

“This will be welcome news to all those who are currently contemplating or pricing up new building projects, especially at a time of such economic uncertainty.

“Significant economic headwinds continue to blow, which has drastically reduced activity across the wider construction sector.

“For consumers, the upside of that is there are fewer capacity constraints and therefore less upward pressure on pricing. Contractors are having to put their best price forward in order to win work.

“We’re also seeing that many of the supply chain issues that arose as a result of COVID-19 have now been rectified, with fuel costs and interest rates also sitting relatively steady for the time being.

“Inflationary pressures remain stubbornly high generally – both at home and abroad – but this is also firmly on a downward track.”

 

Government Changes Impact

This all comes after the Government proposed changes to the Building Act that intend for it to be simpler and cheaper to build.

This includes building consent authorities now having to accept products that comply with certain overseas standards that are equal to or higher than those in New Zealand.

“Anything that makes the cost of building cheaper will be a good thing, provided we also ensure the quality and reliability of the products and materials being used,” Bisset said.

“However, due to the timeframe it will take to implement the changes to the Act and then obtain approval for the products, there is unlikely to be a reduction in building costs in the near future.

“But we’ll be watching this proposal very closely as it progresses.

“It’s important to remember these figures are only averages, and the true cost of building will always be dependent on the level of finishes, internal layout, and all manner of other elements.”

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