Construction Costs Inch Up in NZ, But Remain Below Long-Term Averages

Residential construction costs in New Zealand have edged higher, with the Cordell Construction Cost Index (CCCI) recording a 0.6% lift in the June 2025 quarter.

While that’s a modest increase compared to the 0.3% rise in the previous quarter, it still sits well below the long-term average of 1.0%, indicating cost pressures in the sector remain contained.

On an annual basis, construction cost growth reached 2.7% — the fastest rate since Q3 2023. However, industry analysts say the uptick is largely technical.

“This isn’t a true resurgence in cost inflation,” said Cotality’s Chief Property Economist Kelvin Davidson. “It’s more about base effects from last year than any genuine acceleration in pricing.”

Even with the latest increase, annual growth remains well below the historical average of 4.2%, and far from the peak of 10.4% recorded at the height of COVID-era disruption in late 2022.

Sector Slowdown Eases Pressure

Davidson noted that reduced activity across the construction industry over the past two years has created spare capacity — softening pressure on wages and materials.

New dwelling consents have fallen sharply, down from over 51,000 approvals in the year to May 2022 to fewer than 34,000 today. That decline in pipeline demand has helped stabilise input costs across much of the industry.

However, not all materials have followed the same trend.

The June quarter saw a 6% price increase for weatherboard cladding, while other categories such as decking timber and ceiling insulation recorded small declines.

“Rather than blanket inflation, we’re now seeing more fragmented, category-specific shifts driven by supply and demand dynamics,” Davidson said.

Costs Still High, Activity May Rebound

Despite the slowing growth rate, overall build costs remain elevated — a lingering challenge for both builders and homebuyers.

The high cost of construction continues to push some would-be clients towards established properties, creating friction for new-build activity.

Even so, Davidson expects construction momentum to gradually lift in the months ahead.

“With population growth tracking upwards, borrowing costs easing, and government policy continuing to support new developments, the conditions are there for a recovery,” he said.

That said, the market should brace for moderation, not volatility.

“We may have reached the bottom in terms of cost growth.

Some renewed upward pressure could emerge in 2026, but a return to the double-digit surges we saw during COVID is unlikely.”