Construction costs rise at fastest pace in more than a year

Construction costs rose 0.9% in the December 2025 quarter. Photo / 123RF

Construction costs in the final quarter of 2025 rose at the fastest pace in more than a year, according to new data.

The Cordell Construction Cost Index (CCCI) shows residential building costs increased by 0.9% in the three months to December.

This was the largest quarterly rise since the third quarter of 2024 (1.1%).

The annual pace of growth rose to 2.3%, from 2% in the third quarter last year, but remains well below the long-term average since late 2012 of 4.1%.

Cotality chief property economist Kelvin Davidson said while construction costs continue to increase, the pace of growth remains contained.

“We are certainly not seeing the extreme inflation experienced in the post-Covid phase, when the CCCI annual growth rate peaked at more than 10% in late 2022. During that period, there were supply chain issues for key materials such as plasterboard and rising wages also drove up costs significantly.

“However, although they’re not rising to any huge degree at present, costs haven’t seen significant falls either. Following the previous growth phase, the overall level of cost to build a new dwelling remains elevated even though the growth rate has cooled.”

Davidson said the 12-month rolling total for the number of new dwelling consents has started to rise again, marking a turnaround following a period of stagnation.

According to Stats NZ, building consents peaked at more than 51,000 in the 12 months to May 2022, before dropping to a low point of between 33,500 and 34,000.

This figure has since risen to 35,552 in the 12 months to October 2025, up 6.2% compared with the previous year.

“We are now seeing a recovery that aligns with anecdotal evidence that builders are becoming busier again,” Davidson said.

“This shift reflects lower mortgage rates and increased ability for households to finance projects or buy off-the-plan. The loan-to-value ratio and debt-to-income ratio rules both offer exemptions for new builds, providing a further tailwind for the sector.”

Davidson said the construction sector is set to expand again in 2026.

“The latest CCCI figures remain relatively controlled, although as the industry starts to recover more clearly in 2026, construction cost growth could pick up again,” he said.

“However, a spike similar to the post-Covid phase remains unlikely.”