Construction costs are continuing to rise at a modest pace, although recent increases in fuel prices are beginning to create short-term pressure in some areas.
QV’s latest analysis, which covers major centres including Auckland, Hamilton, Palmerston North, Wellington, Christchurch and Dunedin, found that both elemental and trade rates increased by an average of 0.4% in March.
However, the impact of rising diesel prices is already being felt in specific parts of the construction process. Excavation costs recorded the largest increase, rising 7.8% in March, while piling increased 1.4% and demolition rose 1.3%. Site preparation and substructure costs also climbed by 2.0% and 1.8% respectively, with exterior works up 1.0% over the month.
Fuel costs driving short-term changes
QV Spokesperson Martin Bisset said fuel was the main factor behind these increases.
“The increase in the price of diesel has had an immediate impact on areas such as site preparation, excavation and substructure work, where fuel is a significant input for machinery used in these operations. That’s where the most upward pressure on construction costs is coming from right now,” he said.
Mr Bisset said the full effect of the Middle East war on fuel prices was still emerging. “At this stage, we can see the effect at a trade and elemental level, but the impact on total building costs per square metre hasn’t yet been captured.”
However, the current environment is very different from the sharp cost increases seen during the COVID-19 period. “We’re not seeing the widespread supply chain disruption of recent years, but fuel and freight are certainly re-emerging as important cost drivers,” Mr Bisset added.
A more volatile but balanced market
More broadly, construction cost movements remain mixed. Some materials, including plasterboard, insulation and certain timber products, have increased in price, while others such as copper and steel pipework have declined.
Mr Bisset said the overall picture remains relatively stable, but with more uncertainty. “The key takeaway is that cost growth is still relatively moderate, but volatility has increased.”
What this means for buyers and renovators
For homeowners and investors, this environment highlights the importance of planning carefully when building or renovating. While costs are not rising as rapidly as they did in recent years, short-term fluctuations can still affect project budgets.
Having a clear understanding of costs, timelines and contingencies can help reduce the risk of unexpected expenses. It may also be worth reviewing your financing arrangements early to ensure you have sufficient flexibility if costs change during the build.
A well-structured lending plan can help you manage construction costs and avoid surprises along the way. Reach out to discuss how to structure your lending and keep your project on track.
