Key Facts:

  • A new report from BNZ’s economics team suggests that it is financially better for Kiwis to buy an existing home rather than build a new one.
  • Residential construction costs have increased sharply while house prices have fallen.
  • The cost gap between building new and buying an existing home is predicted to narrow as construction costs stabilize and market conditions improve.
  • Consenting figures show that the average build cost in New Zealand is now over $3200 per sqm, compared to $2200 per sqm in 2020.
  • The price difference between building and buying is now around $200,000, three times the long-run average.
  • The number of dwelling consents has fallen sharply, down 37% year-on-year in September, due to higher interest rates, a weaker housing market, and rising building costs.
  • Anecdotal evidence suggests that some people who signed up for off-the-plan houses in 2021 are walking away from those builds due to falling prices.
  • The change in government and potential rollback of certain policies could impact the construction industry and lead to housing shortages.

Article Summary:

A new report from BNZ’s economics team suggests that it is more financially beneficial for Kiwis to buy an existing home rather than build a new one. The report highlights the sharp increase in residential construction costs and the steep falls in house prices. New Zealand is at risk of underbuilding, despite strong population growth. The cost gap between building new and buying an existing home is predicted to narrow as construction costs stabilize and improved market conditions put upward pressure on house prices.

According to the report, construction costs have surged 35-45% over the past three years, making it significantly more expensive to build compared to a few years ago. The average build cost in New Zealand is now over $3200 per sqm, up from $2200 per sqm in 2020. The price difference between building and buying is currently around $200,000, three times the long-run average.

The number of dwelling consents has fallen sharply in response to higher interest rates, a weaker housing market, and rising building costs. Anecdotal evidence suggests that some individuals who signed up for off-the-plan houses in 2021 are now walking away from those builds due to falling prices. The change in government and potential rollback of certain policies could further impact the construction industry and lead to housing shortages.

Article Source: To read the full article, click here.