A slack sector and more stable costs have contributed to the levelling out of building costs. Photo: Unsplash / Getty Images
House building costs are not rising as fast as they used to, amid a slack sector and more stable costs.
Property research firm Cotality's Cordell Construction Cost Index showed a growth rate of 0.4 percent for the three months ended September and the annual rate slowed to 2.0 percent from 2.7 percent.
Chief property economist Kelvin Davidson said the slower increase reflects a market that has worked through the post-Covid supply bottlenecks and extreme cost pressures of 2021/22.
"Materials are better supplied, wage growth has steadied and we're seeing more predictability in project pricing."
During the pandemic, building costs skyrocketed, peaking at 10.4 percent in late 2022, but Davidson said construction pipeline had stabilised, with about 34,000 new dwelling consents annually, taking the heat out of cost growth.
"The pipeline has thinned, but the underlying level of activity remains consistent rather than stagnant," he said.
Roughly half the index is driven by materials, 40 percent by wages, and 10 percent by other professional and site costs.
The index is based on the cost of building a standard single-storey, three-bedroom house, with two bathrooms, in brick and tile.
Stabilising costs a bonus for builders, buyers
Costs remained a mixed bag, with plumbing rising seven percent, bathroom fittings falling by six percent, and roof tiles and kitchen joinery remaining flat.
Davidson said it was a sign of normalisation, and made builders' and clients' lives easier, when it came to costing projects.
"Builders have more flexibility to manage costs through specification choices and clients can have more certainty that projects will stay close to budget."
Davidson said the outlook for construction costs remained steady, unless another shock occurred, and believed easier access to finance, an easing in listings and improved confidence would mean more work for builders next year.
However, he said slower cost growth did not mean falling prices.
"Construction costs aren't coming down, but the pace of growth has eased and the outlook is far more predictable."
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