Slowest rise in building costs in years

CoreLogic New Zealand says residential construction costs are rising at one of the slowest annual rates on record.

It says its latest Cordell Construction Cost Index (CCCI) recorded a growth rate of 0.9 per cent over the past year.

The first quarter 2025 national CCCI, which tracks the cost to build a typical new dwelling, rose 0.3 per cent in the March quarter, down from 0.6 per cent in quarter four 2024 and well below the long-term quarterly average of 1 per cent.

CoreLogic NZ chief property economist Kelvin Davidson says it’s the second-lowest annual increase since the index began in 2012, and a significant shift after the double-digit growth seen during the Covid-era construction boom.

The CCCI’s peak annual growth rate was 10.4 per cent in quarter four 2022, and the long-term average is 4.2 per cent.

“After several years of intense upward pressure, construction costs have now settled into a much slower rate of growth,” Davidson says.

“But this is a moderation, not a retreat. Labour doesn’t tend to get cheaper, and while materials pricing has flattened out, we’re not seeing any decline in the overall cost to build.” The March quarter saw a familiar mix of price shifts across key materials, says CoreLogic.

Roof flashings and sheet metal rose by 3-4 per cent, structural steel ticked up by around 1 per cent, while kitchen cabinetry fell 2 per cent, and plumbing PVC pipework and fittings dropped by 3 per cent.

Davidson says these changes reflect a sector returning to more normal patterns after several years of disruption.

“We’re well past the extremes of 2021 and 2022, where costs surged across the board.

“These days, we’re seeing more nuanced movements, driven by specific supply and demand factors rather than industry-wide pressure.”

CoreLogic says the sharp drop-off in new dwelling consents and eventual building work over the past two-three years has helped take the heat out of costs.

It says Stats NZ figures show approvals are down across most regions in the past 12 months, except for Otago, which recorded a 25 per cent lift.

Overall, national consent volumes are around one-third below their peak.

“Some builders now have spare capacity, which is helping cap further price rises,” Davidson says.

“Construction activity appears to have stabilised. However, any signs of a recovery remain tentative.”

Looking ahead, Davidson says easing interest rates and favourable lending conditions for new builds may support a modest lift in construction demand, but any return to the double-digit growth rates for costs experienced in 2022 is unlikely.

“If new-build activity picks up again, and there are signs it might, we could see construction costs start to rise a little more quickly over the next year or two.

“The key trend this year is construction costs are no longer spiralling, but they’re also not falling.

“For now, we’re in a holding pattern, which will come as a welcome relief for builders, developers and households alike.”

• For more information, visit https://www.corelogic.co.nz/news-research/reports/cordell-construction-cost-index