Building costs edge up as material prices rise

The cost of building a home is starting to edge up again, with the Quotable Value (QV) CostBuilder’s most recent data showing the first signs of upward pessure as timber and cladding prices rose in the final quarter of 2025.

In QV CostBuilder’s latest quarterly update for November, about 15,600 material and labour prices were applied to its database of more than 60,000 rates across Auckland, Hamilton, Palmerston North, Wellington, Christchurch, and Dunedin.

QV, a state-owned enterprise, says it produced about 14,500 (23.8 per cent) changes to the data over the six centres, in the Cost Planning and Detailed Trade Rates sections.

The average cost of constructing a standard one- or two-storey 150-230 square-metre home in these centres rose 0.5 per cent over the three months to November’s end, and 1.1 per cent over the past year, in sharp contrast to the 38 per cent increases seen between 2020 and 2024.

QV CostBuilder quantity surveyor Martin Bisset says the market is showing signs of gentle upward movement after a prolonged period of flat or falling costs.

“It’s not a surge by any means, but we’re starting to see some early signs of cost pressure returning, particularly in timber, cladding systems, and some specialist finishes.

“For the past year we’ve seen a general cooling in construction inflation, but the latest data shows pockets of the market are tightening again.

“These aren’t dramatic shifts, but they’re worth watching as activity begins to firm heading into 2026.”

The most notable price movements in the final quarter of 2025, in terms of decreases, were plumbing materials, down 1.5 per cent due to the price of PVC tanks decreasing significantly (-36.1 per cent), and Buteline pipe fittings, which were also down (–8.1 per cent), says QV.

While notable price increases were structural timber (+5.2 per cent); proprietary cladding systems (+5.0 per cent); concrete (+4.5 per cent) due to a rise in water stops; diesel (+3.0 per cent); and painting and specialist finishes (+2.3 per cent).

Although there are some decreases, increasing timber prices are more likely to affect the overall building cost, because it’s a principal component.

“What we’re seeing is less a broad-based rise, and more a patchwork of increases and decreases.

“There are more rates rising than reducing, but overall construction costs are stable,” he says.

“For builders and developers, this means the overall cost of a project may not change much, but the mix of where those costs sit is shifting.”

Industry outlook and regulatory changes

Recent proposed changes to the Building Act – including the move from joint-and-several liability to proportionate liability, plus mandatory warranties and professional indemnity insurance for design professionals – could influence construction costs over time, says QV.

While the reforms aim to improve fairness and reduce council exposure for construction defects, their implementation will be critical.

“Any regulatory change tends to create uncertainty before it creates efficiency,” says Bisset.

“If warranties and insurance requirements add new compliance costs, those will almost certainly be passed through to developers and homeowners.

“But on the other hand, more proportionate risk-sharing may reduce delays and disputes down the line.”

“2025 has been a year of stability, and it’s very likely that 2026 will be another year of low construction inflation.

“With the OCR recently having been lowered again to 2.25 per cent, 2026 will be a good time to build.

“The Reserve Bank has stated it expects this rate cut will have a moderate effect on the future growth of house prices.”

However, Bisset warns that the danger with a low OCR is that if there is a rush to build, there needs to be enough capacity in the sector to cope.

“If there isn’t the capacity, it could lead to the cost increases we saw in the early 2020s,” he says.

Meanwhile, he says costs for non-residential buildings (excluding educational buildings) remain stable, rising modestly by 0.5 per cent in the November quarter, but with an annual cost increase of just 0.8 per cent.

“Bear in mind that all of these figures are averages and the true cost of construction will always depend on the level of finishes, internal layout, and all manner of other elements,” Bisset adds.