Construction Cost Growth Flatlines As Industry Slowdown Persists

The latest figures from QV CostBuilder show construction costs overall have barely risen in the second quarter of 2025, amidst an ongoing downturn for the industry.

The average cost of building a standard one- or two-storey 150/230m² home in Auckland, Wellington, Christchurch, Hamilton, Dunedin or Palmerston North has rose just 0.1% in the past three months- down again from the 0.4% increase recorded in the first quarter of this year.

Annually, the cost of building a home in one of those six centres has increased by an average of 1.3%, which is in stark contrast to the double-figure growth experienced throughout 2021, 2022, and 2023.

"This ongoing deceleration in construction cost inflation signals a broader industry slowdown," said QV CostBuilder quantity surveyor Martin Bisset.

"With subdued demand and tighter economic conditions, we’re now seeing many building material prices either holding steady or trending downward."

"Where we previously saw surging labour costs due to shortages, particularly in skilled trades, we’re now seeing a plateau," Mr. Bisset noted.

"This is a positive for developers managing tighter margins in a cooling market."

In the meantime, the cost of building non-residential buildings (excluding educational buildings) has also increased slightly by 0.1% this quarter, with an annual cost increase of less than one percent at just 0.9%. In our Q1 update, costs remained steady, up just 0.1% for the quarter and 1.2% for the year - also reflecting the downward trend in building costs in New Zealand.

"These figures tell a story of stability rather than volatility," Mr. Bisset added.

"Construction costs are plateauing, but that doesn't mean predictability for every project. The complexity, level of finish, and design elements will always have a major influence on overall cost."

However, he warned that geopolitical instability had the potential to impact prices in the future. "New tariffs have exacerbated the high levels of tension and uncertainty in international relations, along with recent escalation of armed conflicts means a general sense of political volatility continues to pose risks, not only to construction costs but also to the economy as a whole," Mr. Bisset said. "Anything that impedes the flow of goods across the world has the potential for increasing the difficulty and therefore the cost of acquiring building materials here in Aotearoa."

Steel framing was among the biggest movers this quarter, down 5.7%; structural steel fell 2.1%; leading to a (1.4%) drop in the prices for Stairs and Balustrades; and Frames (0.7%). Site preparation costs dropped (1.0%) due to a reduction in sheet piling and diesel rates. Suspended ceilings fell 4.6%; and fire proofing costs decreased 3.2%. Bucking the trend, Formwork costs rose slightly by 0.3%; as did exterior walls and exterior finish costs.

Labour rates have remained relatively stable, to March 2025; in the past three months, rising just 0.14% and they are up 1.8% over the past year. The downturn in overall construction activity - particularly in residential housing - has eased pressure on the labour market. Fewer projects mean there’s less competition for workers, which is helping to stabilise hourly rates and control one of the biggest contributors to project budgets.

QV CostBuilder is New Zealand’s most comprehensive subscription-based building cost platform.

In this update, more than 12,400 current material prices were applied to its database of more than 60,000 rates, generating about 6,300 changes to the data across six centres.

Powered by state-owned enterprise Quotable Value, QV CostBuilder’s comprehensive database covers everything from the building costs per square metre for banks, schools, and office buildings, to the approximate cost per sheet of GIB and more than 8,000 other items. It also includes labour rates, labour constants, and much more.

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