CoreLogic NZ’s Cordell Construction Cost Index (CCCI) for Q3 2022 showed further acceleration in the rate of indexed growth in national residential construction costs, with both the quarterly and annual measures surpassing the previous records set just last quarter.
The CCCI indicates the cost to build a ‘standard’ 200 sqm three-bedroom, two-bathroom single storey brick and tile house in Aotearoa increased by 3.4% in Q3, exceeding the 2.6% rise recorded over the three months to June. Annual growth reached 9.6%, almost two percentage points higher than in the year to June (7.7%).
CoreLogic Chief Property Economist Kelvin Davidson said while there are signs of a slowdown for the residential construction industry, they are small and coming off a very high base.
“Overall dwelling consents are now declining year-on-year, however costs are still a problem,” he said.
“The latest Cordell Construction Cost Index clearly shows that it continues to get more expensive to build a ‘standard’ 200 sqm brick and tile, standalone house in New Zealand with both the quarterly and annual indexed growth measures exceeding the previous records set three months ago.”
Mr Davidson said in terms of underlying drivers, the Cordell costings team were continuing to see rising timber and metal prices, which were affecting framing and reinforcing.
This indexed model of construction costs allowed for standard build times, Mr Davidson said, acknowledging that completion timeframes had lengthened lately as some materials remain hard to procure. He also noted the CCCI covers a brick house, so anything with timber cladding will have seen overall costs rise at an even faster pace.
“Looking ahead, I wouldn’t be surprised to see the rate of construction cost accelerate further, potentially to double-digits by the end of the year, before it starts to ease up into 2023. Certainly, one encouraging development in the past month or two has been the improvement in supply chain conditions, with plasterboard for example now much easier to find. This easing in cost growth will be very important in the longer term so developers and households aren’t dissuaded from taking the new-build path which critically assists in boosting overall housing supply,” he said.
CoreLogic researches, tracks and reports on materials and labour costs which flows through its Cordell construction solutions to help businesses make more informed decisions, estimate rebuild and insurance quotes easily and, ultimately, appropriate risk effectively.
The CCCI report measures the rate of change of construction costs within the residential market for a typical, ‘standard’ three-bedroom, two-bathroom brick and tile single storey dwelling.
For more information or to read the report, visit www.corelogic.co.nz/reports/cordell-construction-cost-index.