Huge rise in costs to build new home

Section prices have doubled in the past 24 months and being able to produce house and land packages that meet the $450,000 Home Start grant threshold is getting more difficult, says Venture Developments director Mark Fraser-Jones. Photo / Andrew Warner

Skyrocketing land prices coupled with a hike in building costs and unprecedented demand for property has seen some Tauranga house and land packages increase by $170,000 in two years, experts say.

Master Builders Tauranga president Johnny Calley said a section that may have cost $180,000 just 24 months ago "is now selling for $280,000 and that is a massive increase".

"A house and land package that might have been $480,000 two years ago, now the same house and land will be $650,000."

Other factors fuelling the price increase was the cost of timber with some mills operating 24 hours a day, he said.

"Early this month the timber mills increased their prices by 7 to 10 per cent."

Meanwhile labour costs had also gone up by 5 to 10 per cent and the price of building consents were expensive.

However, Mr Calley said in his view building was a good option.

"I believe it's cheaper to do a house and land package because essentially you are getting a brand new product."

But he said the market and cost of building was still likely to rise and the consumer needed to be mindful when choosing a builder that allowed for that.

"Demand is still at record highs and we are forecasting that to continue through all of 2016 and beyond."

Venture Developments director Mark Fraser-Jones said generally section prices had doubled in the past 24 months.

"Sections that were previously around $150,000 are now around $300,000."

Being able to produce house and land packages that met the $450,000 Home Start grant threshold was getting more difficult, he said.

Health and Safety costs had also risen dramatically and "will continue to with new legislation targeting directors being introduced from the April 1 this year", he said.

Mr Fraser-Jones said existing house prices had lifted so the difference between buying or building was "still quite comparative".

Classic Builders director Peter Cooney said increased housing costs affected affordability for those wanting to get on the property ladder or investors.

"We are seeing a rise in average prices. So long as price increases continue to occur then we will continue to not be able to meet affordability."

Carrus director Scott Adams from The Lakes subdivision said its sections had increased by about $60/sq m in the past two years but the company provided interest-free terms to builders beyond title.

The lift was driven by construction, earthworks and statutory costs, health and safety and changes in the infrastructure code which were upfront costs, he said, combined with market demand.

Since 2012 The Lakes had delivered 830 lots to the market with about another 480 still to build with project completion subject to market conditions set for 2019/2020, he said.

Zariba Properties released 18 lots with sections from $245,000 in stage one of its latest development Terrace Views at Papamoa for public sale on Saturday. The online auction followed 72 sales largely to group builders.

According to the latest Qv.co.nz - E-Valuer suburb statistics, Tauranga's most expensive suburbs to buy in were Mount Maunganui, Matua, Bethlehem, Otumoetai and Papamoa.

QV homevalue registered valuer David Hume said "our research indicates that average property values are now 15.7 per cent above the previous peak in 2007, although certain parts of Tauranga such as Mount Maunganui and Matua are considered to be even higher than this".

There was a lack of available land at present, with building companies desperate to secure residential house sites in subdivisions such as the The Lakes and Golden Sands, he said.

"The quarter acre dream has not been a reality for some time now, with new section releases under 400sq m required to meet the needs of a growing population."

A Tauranga City Council spokesman said council building consent fees were due to go up under the annual plan.