Home building sting: Christchurch second most expensive city

Saturday, 13 January 2024

Christchurch is now the second most expensive city in New Zealand to build a house in, after the cost of construction jumped nearly 40% in three years.

With experts warning those figures are unlikely to drop in 2024, Christchurch lags only behind Auckland when it comes to home building prices.

It has forced people like Charli Hanson and her partner Hamish to abandon plans to build.

Nearly four years ago, the couple put a deposit down on land in an Ohoka subdivision. But lengthy subdivision development delays saw the price of materials keep “going up and up” leaving them increasingly stressed and anxious.

They put their plans for a wedding and starting a family on hold. “My partner got shingles through the sheer stress,” said Hanson.

“I call it the Christchurch tax,” Hanson said. “You could build the exact same house in another city like Wellington, and the cost of materials aren't gonna be as high.”

Eight weeks ago they bought a ready-built Swannanoa home that was “pretty damn close” to the dream home they had planned to build. They calculated the move had left them $150,000 better off than building new and celebrated this week by adopting Scruff, a german wirehaired pointer.

“We don't want our lives put on hold by a developer any more,” said Hanson.

Quotable Value’s (QV) Costbuilder calculations reveal the cost of building a standard home in Christchurch has jumped 38.5% in three years.

An average 150m2 house in Christchurch cost $2910 a square metre to build at the end of 2023, up from $2100 a square metre at the end of 2020, when costs began accelerating during the pandemic. The figure does not include the land, or items including landscaping and balconies, connecting up services, and GST.

Most of the inflation happened during 2021.

However, CoreLogic’s Cordell Building Index shows prices continued to rise in the last quarter of 2023 across the country, though by less than the previous few years.

CoreLogic’s chief property economist, Kelvin Davidson, said the heat had “come out of New Zealand’s residential construction sector”.

Construction labour costs reflected the cost of living, otherwise workers would not live there, Davidson said. “Labour is about half the cost of construction excluding land, so new houses won’t be cheaper.”

Davidson said it “wouldn’t be a surprise” to see housing construction costs rise over the next year by between 3% and 4%.

Material supply chains were “easing”, with timber prices stabilising, some metal prices coming down, and some general hardware items getting dearer, he said.

Stephen Rice, director of Erne Construction which specialises in architectural builds on hill sites, said they were building homes for about $7000 a sq metre, $2000 more than at the start of the pandemic.

The square-metre cost for more modest homes had jumped from about $1800 at the start of the pandemic to $2800 to $3000 now, he said. Stats NZ lists the average square metre cost for Christchurch homes consented last year as $3064.

“Costs are still unpredictable - it’s very hard for suppliers to commit to fixed prices for a whole build if it’s a longer project, Rice said.

“But it’s not as bad as it used to be.”

Costs for structural and reinforcing steel had recently come down but remained well above what they had been, while prices for concrete and windows were going up, he said.

“You have to fully commit to your suppliers if you want a fixed price. They don’t want you shopping around, whereas before you shop around and get the best price possible.”

Contracted carpenters cost $70-plus and hour, up from $45 to $50 back then, he said. Foremen were getting $75-plus, and carpenters $35-40, he said.

Rice said clients wanting to trim costs would be more likely to opt for a lower specification of fittings rather than reducing floorspace.

“Making the house smaller doesn’t save as much as people think.”

Recent research from the Infrastructure Commission pinpoints living costs as a major factor in labour costs for construction, as well as supply and demand, while costs of materials are heavily dependent on global commodity and transport prices.

Lewis Strong, who co-owns the Stonewood Homes North Canterbury franchise, said while costs were not rising as fast as a couple of years ago, they were still going up.

“We are still trying to get jobs through at the right price for people. Everyone is trying to look for a better price.

“Unfortunately there’s a few people out there who are under-cutting and delivering poor jobs.”

Strong said some people were surprised by the cost of what they wanted to build.

Leaving add-ons such as landscaping, paths and balconies to do later was one option some took to keep costs down, he said.

Strong said they had built everything from 75m2 units to 400m2 houses, and found that while homes were not getting smaller in North Canterbury, sections were, especially in subdivisions.

“They are really on the down, size-wise. The land is probably been the biggest cost rise in building a house.”

The rising cost of construction may be contributing to a sharp fall in the number of new homes being consented. StatsNZ figures released this week showed a 19% fall in new homes consented in Canterbury in the year to November to a total of just over 7200. The fall was sharper in Wellington where only 2700 homes were consented last year, a drop of 28%.