We estimate that new-builds are currently running about 6% more expensive than existing properties, which is in line with past norms. Given they’re theoretically of higher quality (e.g. better insulation) than existing dwellings, new-builds will probably always tend to carry a price premium in the future, too. But the gap may get a bit smaller in the next few years, not least as the tax rules become less favourable for new properties relative to existing.

Our recently-developed ‘Market Trends’ dataset contains a breakdown of sales data split by those with a previous transaction (i.e. existing stock) and properties that have just been sold for the first time, i.e. a proxy for new-builds. This may not capture all new-builds, such as some occasions where households have bought a section and commissioned the dwelling project themselves, but it’s still a decent indicator of long-term trends1. And of course, it’s a topic of huge interest given the changing landscape for lending and tax rules, which currently favour new-builds over existing stock.

So what do the figures show? As you can see in the first chart, for most of the time since 2002 there has tended to be some kind of new-build premium across NZ, averaging 6% over that period, but ranging quite widely from -2% up to 15%. Interestingly, new-builds were slightly cheaper (i.e. the premium was negative) than existing properties over a period of about two years from mid-2009 to mid-2011, just the time when the construction sector was battling the GFC and its aftermath – suggesting perhaps some discounting was necessary around that time to get new properties sold.

But there have also been periods when the premium has been significantly positive, most notably in double-digits for most of 2002-04, and again from mid-2016 to mid-2020. To some extent, the gap might then have started to close from mid-2020 (with existing prices playing catch-up) due to people rushing in during that post-COVID phase and taking an ‘any house will do’ approach.

Either way, the percentage premium is now currently at average levels of around 6%, but it’s quite significant in dollar terms, ranging from around $40,000 up to about $50,000 over the past year or so. On February’s data itself, existing properties sold for $768,050 versus new-builds of $811,000.

1. New vs. existing median sale prices (Source: CoreLogic)