Key Facts:

  • The cost gap between building a new home and buying an existing one is currently at its highest level, according to BNZ chief economist Mike Jones.
  • Building a new 180 sq m house will cost around $200,000 more than buying an existing house.
  • The cost gap is expected to narrow as construction activity decreases and migration increases the demand for housing.
  • BNZ economists forecast a 7% increase in national house prices in 2024.

Article Summary:

BNZ chief economist Mike Jones has highlighted the widening cost gap between building a new home and buying an existing one. Currently, building a new 180 sq m house will cost around $200,000 more than purchasing an existing house. The cost gap is expected to narrow in the future due to increased demand for housing from inbound migration, but this will predominantly result in higher house prices. BNZ economists predict a 7% increase in national house prices in 2024. Jones notes that elevated construction costs, lower house prices, and high interest rates are discouraging building activity. Additionally, the removal of mortgage interest deductibility for new builds may further reduce the incentive to build. This situation may lead to underbuilding relative to the population’s needs and place additional upward pressure on house prices. Source Link: To read the full article, click here.