Construction cost increases across New Zealand remain modest, but soaring fuel prices are now squeezing builders and developers.
According to CostBuilder, New Zealand’s leading online subscription-based building cost platform, the latest monthly update analysed more than 11,000 material prices against construction rates in Auckland, Hamilton, Palmerston North, Wellington, Christchurch, and Dunedin. The data shows that overall cost escalation remains relatively contained, with elemental and trade rates both rising just 0.4% over the month—proof that the construction sector is managing core costs efficiently despite external pressures.
However, the sharp spike in diesel prices is beginning to push up costs in fuel-intensive trades. Excavation saw the largest increase at 7.8%, while piling (1.4%) and demolition (1.3%) also rose, directly reflecting the diesel surge. Site preparation and substructure costs climbed 2% and 1.8%, respectively, with exterior works up 1% over the month.
QV CostBuilder spokesperson and quantity surveyor Martin Bisset confirmed fuel as the primary short-term driver.
“The increase in the price of diesel has had an immediate impact on areas such as site preparation, excavation and substructure work, where fuel is a significant input for machinery used in these operations. That’s where the most upward pressure on construction costs is coming from right now.”
The fuel spike coincides with rising global oil prices, heavily influenced by instability in the Middle East. These events are driving up freight and energy costs internationally.
Bisset stressed that while the immediate effects are noticeable at the trade level, the overall impact on total building costs per square metre has not yet been fully quantified.
“New Zealand is particularly exposed to changes in fuel and shipping costs, so recent geopolitical events in the Middle East are relevant for the local construction sector, and they will inevitably have an effect,” he said.
“At this stage, we can see the effect at a trade and elemental level, but the impact on total building costs per square metre hasn’t yet been captured. We expect to have a clearer picture of that in our next CostBuilder update.”
He noted that the current environment is very different from the widespread cost escalations during the Covid-19 period.
“We’re not seeing the widespread supply chain disruption of recent years, but fuel and freight are certainly re-emerging as important cost drivers.”
“It’s important to recognise that this appears to be a short-term spike at this stage. At some point, fuel prices are expected to normalise, and that should ease some of the pressure coming through.”
Material cost movements remain mixed. Increases were recorded in plasterboard, insulation, and certain timber products, while some copper and steel pipework declined.
Overall, Bisset said the market is balanced, but volatility is rising.
“The key takeaway is that cost growth is still relatively moderate, but volatility has increased.