Construction costs soar

CoreLogic’s Cordell Construction Cost Index (CCCI) shows the first quarter of this year also hit a new record high of 2.4%, surpassing the previous fastest rise of 2.2% recorded in the second quarter last year.

CoreLogic’s Chief Property Economist Kelvin Davidson says while New Zealand’s overall economic momentum has lost a bit of lustre in recent months, the construction industry remains strong on the back of dwelling consent numbers, which hit a record high of almost 49,800 in the 12 months to February.

“Estimates vary and carry uncertainty, but there’s a sense now that the industry itself might only have capacity for 30-35,000 dwellings in any given year – quite a bit lower than current consents, implying a spill over into future years,” he says.

Although smaller dwellings such as townhouses and apartments account for 49% of the total figure and will require fewer materials than standalone houses, Davidson says the sheer volume of new builds will mean there’s no respite for the stretched materials supply chain and an industry that’s facing labour shortages.