The latest QVcostbuilder data shows home building costs have risen twice as fast over the past year as they did in the previous year.
QVcostbuilder is an arm of state-owned enterprise Quotable Value (QV), and through an online subscription provides the latest construction cost data to the property and construction industries.
Subscribers can access a comprehensive range of building costs associated with the construction of various buildings, including residential and commercial properties.
The new figures show the average cost of building a new home in New Zealand's four largest cities increased on average by 3.5 per cent in the year to May 2017 and a total of 25.5 per cent since the previous peak of 2007.
This compares with an annual rise of 1.66 per cent in the year to May 2016.
The average percentage rise is measured across a range of residential dwelling types including small-medium and large-sized homes, including one-storey and two-storey homes; multiple unit properties and two- or three-storey townhouses; small apartments, multi-storey apartments and retirement village units and apartments.
The data also shows the average cost of building a standard 140sq m, three-bedroom, one-bathroom home in Auckland rose 2.32 per cent to $272,000 in the year to May.
It's important to note that this average cost will always be dependent on the level of finishes, internal layout, and whether it has a single or double garage and these figures are averages.
Also that the figures exclude other costs such as the demolition of existing structures on the site; increased structural requirements and external works such as landscaping and driveways; parking utilities such as power, water, gas, drainage, phone/data mains; balconies and covered ways and professional, council, legal fees and GST.
Statistics NZ data shows construction activity fell 2.1 per cent in the latest quarter and building consent numbers have also been declining since they hit a 12-year high in mid-2016.
In part, this slowdown in building activity is due to falling investment in residential building construction caused by the latest round of LVR restrictions and banks' stricter lending criteria.
While the LVRs are having the desired effect of slowing the rate of value growth in the residential housing market, the measures are causing unintended effects, such as making it more difficult for developers to raise money to finance the building of much-needed new homes.
This downward trend in building consents and construction activity is particularly concerning because it comes at a time when more housing supply is needed urgently in
Auckland as the city's population continues to grow at record highs, with 44,000 of the 97,000 people who moved to New Zealand in the past year moving to Auckland.
According to Statistics NZ there are 473,448 occupied dwellings and 33,360 unoccupied dwellings in the Auckland Region but just 2817 dwellings under construction, not nearly enough to keep up with the population growth.
The LVRs and stricter lending criteria are leading to lower sales volumes.
CoreLogic data is also showing a fall in the number of sales to first-home buyers and movers and investors needing a mortgage, while cash investors, including those from overseas, are not affected.
If the debt to income ratio is introduced this will only make it harder for New Zealanders on average wages to raise finance to purchase a home.
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