If you’ve been thinking of building a new house the past two years may have been a worrying time. High demand, staffing limitations and supply chain challenges have conspired to produce rapidly escalating prices. Those economic conditions in the NZ building industry post-covid have meant that builders have been at first reluctant, and in many cases simply unable, to provide fixed price building contracts – in turn making bank financing difficult to secure.
However, there are some promising signs that conditions are changing:
Drop in demand.
Firstly the level of demand has dropped quite substantially, with building consent statistics recently showing clear reductions. March was the fifth consecutive month showing a drop in consents for new dwellings nationally. According to Statistics NZ, in the 12 months to March this year, 46,924 new dwellings were consented, down 7.9% compared to the previous 12 months.
Supply chain.
While some challenges certainly still exist with the building materials supply chain, generally speaking it seems we’re past the worst. There are still some materials increasing in price, however in the past few months we’ve had some initial indications of price reductions. It’s still a mixed bag, but there are signs that on average, pricing is stabilising.
Builders looking for work.
What has become very clear in talking to builders that we work with, is that builders and tradespeople are hungry for more work. While most still have plenty of work for the remainder of 2023, they are actively looking for projects to quote for with a view to locking in some jobs for 2024.
Finance.
Given that material prices are largely stabilising and builders are actively looking for work, it makes sense that, anecdotally at least, most builders are now willing to provide fixed price quotes again. While interest rates are still high and likely to remain that way for some time, some of the other rules around bank financing are being relaxed somewhat by the reserve bank and government. At a recent Cambridge Business Chamber event, mortgage brokers and other experts expressed optimism that access to bank financing is still very much achievable and, importantly, improving.
So should you build now?
Well that obviously depends on your situation, and you should definitely talk to your accountant, mortgage broker, and architect first. According to REINZ average house prices are down 17.5% nationally from their peak, so if you’re weighing up whether to build new or buy existing, it’s likely that the numbers for building new don’t yet stack up.
However if you’re looking to build new and it’s just a question of timing, there’s a good chance that now is in fact a great time. By the time you’ve worked with an architect to design your house there ought to be more free capacity in the industry and plenty of builders eager to provide competitive pricing for you.
