House prices are still surging, but developers are struggling to make money because of rapidly rising land and construction costs.
Tuesday, March 1st 2005, 5:41AM
by The Landlord
For housing developer Graeme Causer at Fulton Hogan, the boom in prices is a case of water, water everywhere, but not a drop to drink.
During the past two years land prices had doubled, building costs had gone up 20 per cent and council fees and consents had risen, he said.
"We're making less money than we were. It's not the game it used to be. Land prices are so high that, if section prices don't increase at the same rate, it's difficult for developers to make a buck," Christchurch-based Mr Causer said.
Last week, the Registered Master Builders Federation criticised a recent Government decision to triple the building levy and warned that the increases would end up being passed to the consumer.
"The tripling of the building levy is a cost that cannot be worn by builders in a very competitive market," chief executive Chris Preston said.
Economists have said house prices could fall 5 per cent this year, as demand cools because of slower immigration. Last year, the migration gain was slightly more than 15,000, down from almost 35,000 the previous year.
But despite predictions that the property market was going to slow in last year, the national median selling price hit a record of $265,000 in January, compared with the December median of $260,000, according to the Real Estate Institute.
