The cost of building a house in New Zealand has reached its lowest rate of growth since 2012. According to CoreLogic’s latest Construction Cost Index, the annual increase in residential building costs was just 0.9%—a figure not seen outside of the COVID-19 years for over a decade.
Generation Homes CEO Craig Hopkins says the market is primed for those considering building a home. Speaking to Newstalk ZB’s Mike Hosking, Hopkins noted that while existing homes remain a strong competitor—with more than 33,000 currently for sale—the opportunity to build has rarely been better. As far as building a house, now is the perfect time to do so, he said.
A Dramatic Slowdown in Price Growth
The cost of constructing a standard three-bedroom, two-bathroom home rose by just 1.1% in 2024, down from 2.4% the year prior, and a dramatic shift from the 10.4% surge seen in 2022. CoreLogic’s Chief Property Economist Kelvin Davidson attributed the slowdown to easing supply chain issues and a marked drop in residential construction activity.
“The previous COVID-related pressures on materials supply chains such as plasterboard are no longer an issue,” Davidson explained. “There’s also been a wider slowdown in the number of new dwellings consented and actual residential construction work being undertaken.” The easing demand has reduced pressure on both materials and labour, keeping costs steady.
This trend continued into early 2025, with the QV CostBuilder report showing just a 0.4% rise in the first quarter—down from 0.6% at the end of 2024. Annual growth across major centres, including Auckland, Wellington, and Christchurch, averaged just 1.5%.
Regional Variations Persist
Despite nationwide stability, regional differences in construction costs remain pronounced. According to Wise Move, building on the South Island is generally more affordable, averaging $3,093 per square metre, compared to $3,394 on the North Island. Otago remains the most expensive region at $3,900 per square metre, while Marlborough is the cheapest at $2,669.
The average cost to build a new home in 2025 stands at approximately $462,654, based on a national average home size of 141 square metres. However, this figure can escalate significantly depending on site complexity, location, and design features. Homes requiring engineering reinforcements, expensive cladding, or built on challenging terrain can see prices rise above $4,000 per square metre.
Buying vs. Building: A Reassessment
With existing home prices still high—the national median stood at $770,000 at the end of 2024, and $1.048 million in Auckland—building is increasingly being viewed as a competitive alternative. While construction costs remain elevated compared to pre-pandemic levels, the stabilisation of material prices and reduced demand are offering new opportunities for prospective homeowners.
Additionally, building new comes with long-term benefits that go beyond initial costs. New homes are more energy efficient, built to modern safety codes, and often equipped with the latest technology and sustainable features.
Industry Outlook
Although the construction sector remains in a downturn, there are signs of improvement. Residential building consents rose by 2.6% in January 2025, reversing a 5.6% decline the previous month. The sector is also benefiting from favourable lending policies, such as loan-to-value ratio (LVR) and debt-to-income (DTI) settings that favour new builds.
“Construction conditions look set to improve in 2025 as mortgage rates drop, but overall cost growth may still remain relatively controlled,” Davidson noted. Supply chain improvements are also playing a crucial role in keeping costs in check, with items like external timber products and kitchen joinery seeing price declines in late 2024.
However, risks remain. Quantity surveyors have warned that global geopolitical instability could yet disrupt material supplies and affect costs, similar to the COVID-era challenges.