The cost of building a house is high, but it will never get better

Sunday, 13 July 2025

The cost of building a “standard” home rose 2.7% in the year to June, Cotality says.

It costs more to build a house than ever before, but the current slow rate of price growth means that right now it could be as good as it gets.

New Zealand’s geographical isolation, small market size, and limited choice of products has long meant it is more expensive to build here than in comparable countries, such as Australia.

Building and Construction Minister Chris Penk was just one of many to point out the disparity in trans-Tasman costs when he announced the Government’s plans to tackle high building costs last year.

The cost to build a standalone house in New Zealand is around 50% more expensive than it is in Australia, he said.

During the Covid pandemic, supply chain disruptions and product and workforce shortages pushed the costs of essential building materials and labour up steeply - and costs have not stopped rising.

The price of the structural carpentry needed for a standard build went up 4% over the last year, Cotality says.

Cotality's latest Cordell Construction Cost Index was released this week, and it shows the cost of building a “standard”, single-storey, three-bedroom, two-bathroom, brick-and-tile home rose 2.7% in the year ending June.

The index, which is based on a combination of material, labour, plant hire, and subcontractor costs, measures the change in the cost of building, but does not provide the actual costs.

But Cotality has provided the Sunday Star Times with the annual cost changes of a selection of 11 of the key components required for a standard house build.

It is window hardware that has seen the biggest increase, up 30% or $2600 from a year ago, while none of the other components selected turned in increases of more than 5%.

The price of the structural carpentry (including timber and flooring products) required rose 4% or $1100 over the last year, and masonry products (including cement and bricks) were up 2% or $450.

Plumbing fit-off and roofing plumbing costs were up 5% ($900) and 2% ($170) respectively, while painting, plastering and joinery were up 5% ($850), 4% ($1300), and 2% ($400).

The selection does not represent all the components needed for an entire house. Labour costs, roofing electrical work and landscaping were not included in the breakdown, for example.

Cotality chief property economist Kelvin Davidson says building costs can be patchy, with some materials going up and others down at times, but overall building never gets significantly cheaper.

Building costs are not rising as fast as they were, but they are still high, Cotality’s Kelvin Davidson says.

But although the annual growth rate in the index has nudged higher, cost inflation across the residential building sector remains relatively subdued, he says.

“At 2.7%, annual cost growth is still well below the long-term average of 4.2%, and a far cry from the Covid-era peak of 10.4% in late 2022.”

A decline in consents for new homes and reduced workloads across the sector over the past two to three years have created a degree of spare capacity, helping to ease cost pressures, he says.

“That decline has taken the heat off both wages, which account for around 40% of the index, and material costs, which represent roughly 50%.

“Still, building costs may not be rising as fast as they were, but they remain high, at about 25% more than pre-Covid.”

Davidson says households can be more confident costs will not run away during a project, but the total cost to build remains a hurdle.

There are some signs of economic recovery, and although it is proving slow to flow through to the construction industry, it is likely to start doing so next year, he adds.

“That could lead to some renewed upward pressure on building costs, but a return to the double-digit growth rates of the Covid-era seems unlikely.”

Building merchants are operating in a competitive marketplace, construction expert Mike Blackburn says.

Canterbury-based construction expert Mike Blackburn, from Blackburn Management, says the market has normalised from the extremes of the Covid era, which was characterised by the Gib board crisis in 2022.

Some building materials saw double digital price increases, and it caused the cost of a build per square metre to go up by about 20% annually, he says.

“It’s much better now, and over the last 12 months the costs of a build per square metre are back to 2% to 3% annual increases.

“With building materials, merchants are operating in a really competitive marketplace, and that’s impacting on prices.”

In the Canterbury region, land prices have also come back from the heights of the market peak, while he understands labour rates generally are relatively stable.

Quotable Value’s latest costbuilder figures support this, showing labour rates increased by 1.8% over the year to the end of March.

Blackburn says it reflects the quiet building industry, and is a stark contrast to the peak of the boom when staff were quick to move between jobs for improved pay.

“Now, there’s not as much work so lots of builders and other tradies moving overseas for work.

Labour and sub-contractor rates are holding steady, Certified Builders’ Malcolm Fleming says.

“It means that when the industry picks up again, there’ll be a big skill shortage, tradies will be in demand, and that’ll put pressure on labour costs again.”

Certified Builders chief executive Malcolm Fleming asked members of his organisation about the costs of products, sub-contractor rates and labour rates for the Sunday Star Times this week.

They report product increases of about 5% are the norm, and that it is still a very tight market which is leading to supplier competition, he says.

“Suppliers are trying to win builder business and that’s keeping prices stable.

“The tight market also means sub-contractors are not lifting their rates in case the main contractor takes on someone else. And many are keeping their sunset clauses open for longer because they need work.”

When it comes to labour rates, it seems people in building crews are being timid about asking for wage increases, Fleming says.

“They have seen people they know in the industry lose their jobs, and they don’t want to be in the same position. So labour rates are staying stable too.”

It all makes for steady prices for homeowners, and that means it is a good time for those with build plans to engage a qualified builder, he says.

Building and Construction Minister Chris Penk has been driving the Government’s efforts to tackle building costs.

Combined Building Supplies Co-Operative represents about 1600 builder and tradie members. It buys building supplies in bulk for its members, from Northland to Bluff.

The organisation’s chief executive Carl Taylor does not think building product costs are too bad at the moment, although land costs remain a problem.

He recently built two three-bedroom, relatively high-spec homes in Ashburton for about $1850 per sqm, which is pretty good, he says.

“But building costs are still going up, and they are never going to drop back significantly because the costs just don’t get cheaper.

“For people building, it is about how to keep their costs down, how to design a build as efficiently as possible, and ensuring you make the most of materials and do not have high wastage.”

The co-operative helps with that because it is about collective buying in bulk which allows them to purchase products for a better price, Taylor says.

“What makes a difference to building product costs is choice, and that’s something New Zealand doesn’t have. Councils have a monopoly on building consents, and there are not many products available compared to Australia.”

In Australia, there are more options and products, and because of that it is possible for builders to bring costs down, and do things more cheaply, he says.

“We are really supportive of the Government’s efforts to tackle building costs, but I don’t think we will see much impact from their policies, such as the rule changes for product certification for a couple of years.”