Is now the time to build your dream home?

Thursday, 11 July 2024

Residential construction costs have dropped the first time in 12 years.

The Cordell Construction Cost Index (CCCI) revealed a 1.1% decrease in the three months to June.

For the first time in 12 years residential construction costs have dropped, according to CoreLogic.

The Cordell Construction Cost Index (CCCI) revealed a 1.1% decrease in the three months to June.

CCCI is a quarterly industry report that measures the rate of change of construction costs within the residential market to build a ‘standard’ 200 square metre three-bedroom, two-bathroom single storey brick and tile house.

The outright fall in building costs in the second quarter also meant the annual growth rate slowed from 2.3% in Q1 2024 to 0.6%, a new record low for this indicator. The previous mark was 2.0% in Q2 2014.

CoreLogic chief property economist Kelvin Davidson said the decline followed the industry's completion of a surge in building consents and resolution of COVID-19 supply chain disruptions, with the subsequent quieter period reducing construction cost growth below long-term averages.

So is it time for you to finally get your dream home underway?

“There’s lots of considerations,” he said.

The outright fall in building costs in the second quarter also meant the annual growth rate slowed from 2.3% in Q1 2024 to 0.6%, a new record low.

Construction costs were still a lot higher than they were two or three years ago and interest rates continued to be high. New builds were also exempt from Loan to Value and Debt to Income restrictions so would-be home builders can use a smaller deposit but that still relied on the bank providing the finance, Davidson said.

“If you want to build, it’s not quite as expensive as it once was three months ago but it’s still quite expensive.

“It’s probably not a bad time to look at a new build if you can get the finance, but it’s not going to be a screaming bargain either.”

It can be done, says developer/builder Mike Dickerson: In fact, he's just done it, for his partner.

He expected construction costs to remain fairly flat for the next while as the industry experienced a downturn and builders continue to compete for new jobs.

“There are reasons to think the industry or costs from a home owner’s perspective will be favourable.

“There is a decent chance we might see some further falls in construction costs in the next quarter or two.

Owner of the New Zealand master franchise of GJ Gardner, Grant Porteous and his wife and business partner, Ellie.

“But will it get dramatically cheaper? Probably not.”

Grant Porteous, owner of the New Zealand master franchise of GJ Gardner, said for a myriad of reasons, building now, in a down market, had many real tangible benefits for aspiring home owners.

“For one there is not just savings to be had, and deals on land your builder can help you with, but with an organised builder, build times should be at their very best, saving you time which equals money.

“Build times should be at their very best due to many factors in this market. For example, all the resources from top designers, engineers, builders, plumbers, painters, are looking for work and can do most work immediately.”

Equally manufacturers and merchant suppliers had all stock at hand, and pre-made components such as frames, windows - lead times were minimal, he said.

“In this market we have seen reduced material supplies and contractor rates which will not last when the market heats back up which is inevitable as history shows. History also shows the down slow market is only ever a few years, with the bounce and rising house prices going on for up to seven years to a decade.”