Residential building costs still increasing but price rises have slowed

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The average cost of building a home in the main centres rose 9.5 percent in the year ended June.
Photo: 123RF

Residential building costs continue to climb but price rises have slowed, according to a new report by Quotable Value.

It said the average cost of building a standard three-bedroom home in the country’s main centres rose 9.5 percent in the year ended June, compared to the 20.9 percent annual increase at the same time last year.

QV’s CostBuilder quantity surveyor Martin Bisset said a 9.5 percent increase in the cost would be a lot under normal circumstances.

“But the good news is it’s just less than half the rate of building cost inflation measured at the same time last year,” he said.

Bisset said costs had “definitely slowed” in the first six months of this year, with costs rising 3.8 percent in the six months ended June 2023.

“It looks as though they are starting to level out now, with the worst of the construction inflation boom now firmly behind us and strong demand for materials and labour continuing to ease across much of the country,” he said.

But Bisset warned of uncertainty ahead for the building industry and the economy, meaning it was difficult to predict how costs would change for the rest of the year.

However, he said costs would eventually stabilise.

“With inflation and interest rates stubbornly high, a general election in October, geopolitical issues and rebuild work on Cyclone Gabrielle still to fully get going, there is still a lot of economic instability in the domestic construction market,” Bisset said.