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- Building inflation was at pre-Covid-19 levels, rising 0.3 percent in the past three months
- Supply chain disruptions and shortages have eased
- Builders have cut margins to get jobs in a slow market
Building cost inflation is back to pre-pandemic levels as some material costs falls, supply chains normalise, and builders cut margins to get work.
The latest QV CostBuilder showed the costs of building a standard three bedroom house in the main centres rose 0.3 percent in the latest quarter, the same as the previous two quarters.
Changes in data collection meant there was no annual rate, but in June it was 1.8 percent, and peaked at nearly 21 percent in 2022.
QV CostBuilder spokesperson Simon Petersen said higher prices caused by supply chain disruptions have eased and a weak economy had stalled demand.
“What we’re continuing to see is building cost inflation returning to much more ‘normal’ levels. However, there is still an abundance of economic and geo-political uncertainty that has the potential to impact construction costs.”
In the latest reading more expensive doors and plumbing pipes offset cheaper structural steel and ceilings.
Cutting margins
Petersen said the fall in the amount of work available meant builders were most likely cutting their margins to get work.
“A great deal of work has dried up across the construction sector, we don’t have those massive capacity constraints and contractors are having to compete for work and out their best foot forward and the benefit for consumers is that it’s keeping a lid on costs.”
He said the current environment was bringing some stability and certainty to the sector, with less risk of a race to the bottom on pricing.
“Anyone looking to build right now can have more confidence that their estimated costs and the actual costs are in the same ballpark.”
QV’s CostBuilder was based on the average cost on more than 60,000 construction items in six main centres, but the final build cost home would depend on factors such as the finishes, layout or the size of the garage.