New Zealand Home Construction Costs Stabilising, But Rising Costs Persist in 2024

Date Published: 15 January 2024

Key Facts

• Building costs for a standard dwelling in New Zealand increased by 2.4% in 2023. This figure indicates a slowing in the pace of cost growth, the lowest annual increase since late 2016.
• The overall number of dwelling consents has dropped but remains sizable. In November, there were 2,958 dwelling consents, down 36% from the previous year. The annual running total is currently 38,209, down from the peak of 51,015 in May 2022.
• Employment rose by 0.1% in November, marking a consistent growth trend in job availability. The number of jobs is also 2.7% higher than a year ago, equivalent to nearly 64,000 positions.
• Data from the Reserve Bank shows that in November, 72% of new loans were fixed for up to two years, with only 10% of borrowers taking out loans longer than two years.
• Strong net migration over the past six months has increased the demand for property and contributed to a higher-than-average increase in rents.

Article Summary

The construction costs for building new homes are finally beginning to stabilize due to factors such as a slow in construction volumes and materials supply chains returning to normal. Despite this, costs are still on the rise, which means it’s not getting any cheaper to embark on a new project, particularly as wages typically account for around 40-50% of the overall cost.

Last year saw a 36% drop in dwelling consents in November, marking the fourteenth decline in consecutive months. However, the figures remain relatively high. New Zealand is still issuing a substantial number of consents, with the average monthly figure sitting around three thousand.

The labour market is showing signs of stability, with a 0.1% increase in employment recorded in November, the only decline in the past 20 months. Most new loans were fixed for two years, with only 10% of borrowers opting for a longer term. The housing market continues to be buoyed by strong net migration, which has increased property demand and sent rents soaring.

Despite the numerous changes and fluctuations in the housing market, the main themes remain the same: rising costs, dwelling consents decreases, employment growth and increased rent due to immigration. These factors continue to shape the New Zealand property market as we move into 2024.

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