File pic Photo: RNZ / Alexander Robertson
New figures show the growth in residential construction costs has fallen to its lowest level since 2016.
Data from CoreLogic shows the annual growth in construction costs is 2.4 percent, well below the 10-year average of 4.5 percent.
CoreLogic chief property economist Kelvin Davidson said the country's residential construction sector was facing less pressure, compared to its peak at the end of 2022.
That was due to material supply chains easing, timber prices stabilising, and modest falls for metal products.
"On the flipside however, there have been some price rises on general hardware, mainly imported products. It's also possible that H1 insulation standards are exerting some upwards pressure but it's not possible to disentangle that effect from all the other influences."
Davidson said while builders were still reasonably busy, they were not facing the intensity of recent years.
Looking to the year ahead, Davidson said the pace of construction cost growth could remain subdued.
"The surge in net migration may help to restrain the pace of construction sector wage growth, which could also cap overall cost growth, considering that salaries account for 40-50 percent of the total cost of a new-build, excluding land," Davidson said.
He noted the decline in new dwelling consents suggested that a softer phase for construction activity could also be a pattern that remained for some time.
"Although it's unlikely costs for households potentially looking to buy a new-build or commission their own project will get any cheaper, at least costs shouldn't be spiking higher either."
Davidson said demand incentives such as lower deposit requirements under the loan to value ratios for people to invest in new-build properties would give developers confidence to pursue new projects.
"In the long run, this new supply is what we need to keep housing affordability under some kind of control," he said.
CoreLogic's report measures the rate of change of construction costs within the residential market for a typical, 'standard' three-bedroom, two-bathroom brick and tile single-storey dwelling.