The cost of building a new home dropped 1.1 percent in the three months to June. File photo. Photo: RNZ
The cost to build a new house has dropped for the first time in more than a decade, according to a new report.
The latest Cordell Construction Cost Index shows costs dropped 1.1 percent in the three months to June - the first decline in the report's 12 year history.
That slowed annual growth to a record low of 0.6 percent, compared to 2.3 percent in the first quarter.
CoreLogic chief property economist Kelvin Davidson said the decline is a result of the easing of supply chain disruption caused by Covid-19.
He said the downturn in the construction sector has also contributed.
"We're seeing volumes fall, builders are sort of competing a bit more strongly to to get jobs and and that's flowing through to lower costs. Wages have have flattened out, we're seeing falls in some building materials, things like structural steel, kitchen joinery, tapware and electrical light fittings.
"These things have actually gone down so overall the index is smaller 1.1 percent. It's at a quite a notable shift and and obviously good news for people who are looking at building a house."
Davidson said it was a small decline compared to the rapid growth through the pandemic and the 2022 building boom.
"It's important to make that distinction between the level of costs and change or the growth rate. So we have seen them dip a little bit, but they are still quite high because there has been a lot of growth in the past two or three years in construction costs."
He said the small drop in costs may encourage some investors to build, but high existing housing stock, high interest rates and tax rules will continue to be a deterrent.
"It's certainly not easy. You've got other considerations, things like high stock of listings amongst existing dwellings. You might be able to find what you want rather than going new build. New builds do still cost a bit more than the equivalent existing house as well. We're also seeing the tax rules change, which are reduce the incentives for people to look at new builds. So there are still some challenges."
Davidson said with costs expected to stay relatively flat for a while, it might not be a bad time to build.
"I think we'll see a lot less growth than what we've seen over the past couple of years, that's for sure, because the industry is in a downturn... I think there is a sense that the next six to 12 months could be a lot flatter in terms of construction pricing, which will be favourable for people who are looking at the new build project."
