The cost to build a new house has fallen for the first time in at least 12 years, according to CoreLogic, with no price growth tipped for several more quarters.

The Cordell Construction Cost Index measure, which began in 2012, tracks the cost to build a standard single-storey, three-bedroom, two-bathroom brick and tile house. It decreased 1.1% in the three months to June.

The decline in building costs has been pinned on the major downturn in the construction sector and a slowdown in the growth of average hourly wages.

Falls in the index were recorded across several important building materials, including structural steel and kitchen joinery. Costs for tapware and electrical light fixtures also fell.

CoreLogic chief property economist Kelvin Davidson said the change came after Covid-19 supply chain shortages ended and a surge in building consents finished.

The cost to build has risen dramatically over the past four years.

Building consent numbers are down 23% and apartment consents continue to plummet, down by 52% from May last year.

Davidson said: “The downturn in workloads in the construction sector has eased the pressure on capacity and that’s flowed through to reduced building costs.

“Coupled with a slowdown in the growth of average hourly wage rates, the flattening of building materials costs has also caused a reversal in trends from the rapid growth in construction costs in the past few years.”

The outright fall in building costs in the second quarter also meant the annual growth rate slowed from 2.3% in quarter one to 0.6% — a new record low for the indicator.

Tradies told 1News about a big slowdown in jobs last week, amid scenes of abandoned developments on lots across the country.

Builderscrack.co.nz co-founder Jeremy Wyn-Harris said some shops were going out of business as work became “scarce”.

“Work is more scarce than it has been in a while,” he said.

“There are opportunities there — it’s just a lot harder to secure work.”

According to CoreLogic, a forecast for fewer new house consents and subdued construction activity would likely mean flat or further falls in overall building costs in the next few quarters.

“Construction costs spiked during 2022 due to lingering Covid-affected supply chain issues, as well as a boom in construction activity as dwelling consents peaked around that same period,” Davidson added.

The slowdown’s meant builders and large construction companies have had to pick up smaller jobs to stay afloat.

“Those factors have all now been resolved with material supply back to normal, dwelling consents falling and the pipeline of jobs coming to completion. This has alleviated significant pressure on the industry, freeing up capacity and reducing costs.”

The demand for new builds was also likely reducing in the property market, with an “increased availability of established properties on the market.

“Elevated stock levels among existing property listings means fewer households are going down the new-build path,” Davidson said.

“It’s also possible the higher cost of a new-build compared to an established property could also be a deterrent, especially when general household finances are tight.

Contractors are urging the Government to move fast and kick delayed projects into gear.

He added the Government’s recent changes to the brightline test and interest deductibility rules have also reduced the incentives for investors to look at new-builds.

“The exemptions and lower construction costs are good news for those considering new building projects or buying from developers,” the CoreLogic economist said.

“However, with dwelling consents down nearly 30%, the downturn could impact future housing supply. That said, the risks of widespread housing shortages re-emerging seem relatively low for now, especially since the Government is pushing so hard at present to increase housing supply.

“The hope is that more stable economic conditions and lower interest rates in 2025 will help revive house-building activity.”

Wellington led the downturn, with residential construction down 15% in the last quarter.

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