Bay of Plenty first home buyers are being pushed out of the new house market as land prices skyrocket and the cost of building materials increase, experts say.

Core Logic figures show the average sale price for vacant residential land jumped 46 per cent to $336,000 from about $230,000 between 2007 and 2014.

Industry leaders were divided on the exact amount the increased price of building materials would add to the final bill but the Bay of Plenty Master Builders Association said depending on the size of the home it could be up to $25,000.

A letter sited by the Bay of Plenty Times from PlaceMakers Mount Maunganui to its builders showed from August 1 prices would increase between five and seven per cent on a range of products from Firth Masonry, Permapine/Herman and James Hardie.

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Those businesses did not respond to questions from this paper.

Bella Vista Homes general manager Craig Carter says spiralling land costs had added a significant cost to a build and disadvantaged first-home buyers. Photo/Andrew Warner.
Bella Vista Homes general manager Craig Carter says spiralling land costs had added a significant cost to a build and disadvantaged first-home buyers. Photo/Andrew Warner.

Classic Builders co-director Mathew Lagerberg said some people would be in a better financial position to weather the price increases.

"Each person's situation is unique. It's first home buyers who may be disadvantaged the most and miss out on entering the housing market."

Land prices were "increasing fast, with the average land price now costing between $250,000 to $300,000".

The average price for a three bedroom home from Classic Builders had also soared from $380,000 to $450,00 three years ago to $585,000 to $650,000.

Master Builders Bay of Plenty president Johnny Calley said it was the second material price hike in one year because the cost of some products went up in January.

Consumers would take the hit but builders would have to honour pre-sold contracts and absorb the cost, he said.

Obviously the first home buyers are the ones that get affected more because of the affordability hurdles.

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Bella Vista general manager Craig Carter said land prices had skyrocketed and it was harder to get first home buyers into houses.

"We are struggling to have anything to sell under $550,000 and that is by sub-dividing the sections down to 300sq m or 400sq m. That is the only way to get our pricing down to a level that is affordable for first home buyers is to cut the section size down."

Demand was "absolutely crazy", he said.

"Sales are not a problem, demand is still very strong but we are mindful we have to build these houses in a timely fashion."

The company sold an average three bedroom land and house package two years ago for $400,000 but that had jumped to $550,000 to $600,000, he said.

New Zealand Certified Builders Association chief executive Grant Florence said the land was a massive component and accounted for about 50 per cent of the cost while materials and labour accounted for the rest.

"Obviously the first home buyers are the ones that get affected more because of the affordability hurdles."

The situation was driven by demand and labour costs were also starting to creep while a shortage of skilled tradies in the construction industry was compounding the problem.

Apprentice numbers were at record rates but Mr Florence said people were getting staff requests from Australia looking for builders "so that is going to make matters worse".

The association had 450 members in the region and they were all "crazy busy", he said.

A Tauranga couple that asked not to be named said it was "disheartening" and despite being able to spend $450,000 the pair had been priced out of the market.

Core Logic senior research analyst Nick Goodall said statistics also revealed that in the last 12 months first home buyers were less active in Tauranga than the rest of the country, averaging 16 per cent of all house sales compared to 21 per cent nationally.