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Rising build costs bad news

More new dwellings are desperately needed in cities around New Zealand, particularly Auckland, but new data shows that building costs are on the rise.

Friday, June 23rd 2017, 8:00AM

by Miriam Bell

New Zealand’s glaring shortfall in housing supply is widely recognised – and yet the number of dwellings needed to address the problem are simply not being built.

While there are several major reasons for this state of affairs, one of the reasons for it comes down to building costs.

Now, QV has released new data generated by its costbuilder tool which shows the average cost of building a standard 140 m², three bedroom house in the country’s four main centres went up by 3.5% in the year to May 2017.

This means the average cost of building a standard new house has gone up by 25.5% since the previous peak in 2007.

QV national spokesperson Andrea Rush said that Auckland and Christchurch remain the most expensive places to build a house, with average costs of $272,000 and $277,375 respectively.

But while building costs went up by 2.32% in Auckland and 1.92% in Christchurch, it was Wellington that saw the biggest jump in costs over the year.

The average cost of building a standard house in the Capital went up by 2.43% to $258,000.

Even though building costs in Dunedin went up by 2.12%, it remains the least expensive city to build a house in with an average cost of $254,000.

Rush said the figures exclude other costs like the cost of land; demolition of existing structures on the site; additional costs due to building code changes or increased structural requirements; and utility connections.

“It’s important to remember the average cost of building any home will always be dependent on the level of finishes, internal layout, and whether it has a single or double garage and these figures are averages.”

Not only are building costs going up, but the number of consents being issued is dropping.

QV’s data comes hot on the heels of Statistics New Zealand’s latest building consent data which revealed a decline in consents, after peaking at a 12 year high in mid-2016.

Rush said the decline in consents was partly because of banks’ stricter lending criteria which was making it harder for developers to gain finance for building projects.

“But the downward trend in building consents and construction activity is concerning as it comes just at a time when more housing supply is urgently needed, particularly in Auckland."

It is estimated that Auckland has a shortage of around 35,000 homes and needs to have 11,000 to 12,000 built each year for supply to keep pace with demand.

Meanwhile, cities like Queenstown and Hamilton also have major supply shortages and need many more homes to be built.

Read more:

Building for the future 

Consents slump bad news 

Shortfall to get worse before it get better

« Free Investment Property Showcase Events: Auckland, Wellington and ChristchurchSix great ways to maximise property value »

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Lender Flt 1yr 2yr 3yr
AIA 4.55 3.19 3.19 3.49
AIA Special - 2.69 2.69 2.99
ANZ 4.44 3.15 3.25 ▼3.39
ANZ Special - ▼2.55 ▼2.69 ▼2.79
ASB Bank 4.45 3.19 3.19 3.49
ASB Bank Special - 2.69 2.69 2.99
Bluestone ▼3.49 ▼3.49 ▼3.49 ▼3.49
BNZ - Classic - ▼2.55 2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.60 2.65 2.80
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 3.19 3.49
SBS Bank Special - 2.79 2.69 2.99
The Co-operative Bank - Owner Occ 4.40 ▼2.69 ▼2.75 ▼2.99
The Co-operative Bank - Standard 4.40 ▼3.19 ▼3.25 ▼3.49
TSB Bank 5.34 ▼3.35 3.49 3.79
TSB Special 4.54 ▼2.55 2.69 2.99
Wairarapa Building Society 4.99 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.55 2.69 2.79
Median 4.55 3.19 3.22 3.39

Last updated: 13 July 2020 7:38am

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