Where does it cost most to build a home?
Residential building work costs have climbed over recent years, but new data suggests the bills are higher in some areas than others. Miriam Bell reports.
Auckland teacher Naomi Bell knew renovating her bathroom would be expensive, but it did not occur to her that the price for it might be different in another part of the country. The bathroom in her family home is reaching the end of its lifespan, and it is time to upgrade, so it is being demolished and then rebuilt anew.
The rebuild will involve putting in a toilet, which requires resource consent, and includes tiling, which is more costly than other options, such as lino.
She says it has a project manager and a team to work on it, and the price will be in the $70,000 to $75,000 range.
“It is insane how much you could spend on this, and you could also do it more cheaply, but we have opted for a reno in the middle of the price range.
“But the work will cost much more than we thought it would when we decided it was the right time for a new bathroom.”
When asked how the price might compare to elsewhere in the country, Bell thinks Auckland prices are likely to be lower than those in other places because of the size and competitiveness of the market.
It is not a question with an easy answer because while different data sets show building costs do vary around the country, they also provide different takes on where prices are highest or lowest.
So is it possible to identify where it costs most, or least to build?
CoreLogic publishes the Cordell Construction Cost Index, and to assess construction costs across the country it examines labour and material costs in different regions.
Using reported wage rates, research into material prices and transport logistics, the differences between the regions are combined and weighted according to their contribution to the total cost of a house.
CoreLogic head of research Nick Goodall says a ratio is then applied to establish what costs are in certain areas, and then, using the upper North Island ratio as the baseline, it is possible to say other areas are cheaper or more expensive to build in than that.
The percentage ratio for the upper North Island, which includes Auckland, is 0%. By comparison, the lower middle North Island is 6.9% cheaper than Auckland, and that makes it the cheapest area to build in the country.
In the middle North Island and upper South Island it is 4.4% and 3.8% cheaper to build than in Auckland, while in the upper middle North Island and the lower North Island, which includes Wellington, it is 0.8% and 0.6% cheaper.
But in the middle South Island, which includes Christchurch, and the lower South Island it is 3.8% and 2.5% more expensive to build than Auckland.
Goodall says the reason the upper North Island is more expensive than most of the rest of the country is probably due to lower wages in the cheaper areas, with not much difference in materials or logistics.
Higher labour costs make things more expensive in Auckland, although it is probably not negatively affected by freight costs, he says.
“The fact it costs two or three times more in the lower and central South Island than in Auckland is probably due to isolated geography and logistical issues, and maybe less supplier and product availability.”
Narrowing in on cities, Quotable Value (QV) analysis of the six cities covered by its CostBuilder database found Auckland was the most expensive place to build a one- or two-storey house.
It was followed by Christchurch, Wellington, Hamilton, Dunedin and Palmerston North.
On average, the build cost in Christchurch is 97% of Auckland rates, while Wellington is 96%, Hamilton is 93%, Dunedin is 92% and Palmerston North is 91%.
A QV spokesperson says the figures are based on CostBuilder rates for the base building works of typical buildings within city areas, and exclude a range of costs, including land, demolition, landscaping and driveways, utility connections, and GST.
Generally there are no differences in material rates across the country, he says.
“The main reason for the differences is the cost of labour. Auckland has higher labour rates than the rest of the country and its average rate for all trades is between 5% and 20% higher than the other cities.”
But Canterbury-based construction expert Mike Blackburn, from Blackburn Management, says the best way to assess build costs, and work out regional differences is by the dollar cost per square metre.
On that basis, he analysed the data for the country as a whole, and for Auckland, Wellington and Canterbury. As with QV, the cost is for a basic build, and excludes costs such as land and landscaping.
Blackburn’s analysis shows the national build cost was $3236 per square metre over the year to May, and that Auckland is not the most expensive region to build in.
In Wellington, the build cost was $3396 per square metre over the year to May, while in Auckand it was $3301, and in Canterbury
it was $2911.
He says there is a lot of competition in the Canterbury and Auckland markets, which impacts on costs, and the downturn in the market nationally also suppresses cost increases.
“In a tighter market people look for bargains, and there is increased competition among merchants. But it takes time for those reduced costs to flow through to the data.”
Graham Vercoe is the owner of GJ Gardner’s Nelson franchise, and has been a developer for over 20 years. He says there are factors beyond basic build costs which determine the differing prices people pay around the country, and even within regions.
Those factors include location and the topography of the land, the type and size of the houses being built, freight and logistical issues, and council regulations and costs that vary widely.
There are 67 territorial authorities, all of which have a city or district council, and under local government legislation they have the ability to charge development contributions, for example, he says.
“Some charge smaller contributions, while others are more exorbitant, and while they come prior to a section being titled in a development, they are all a direct cost to the homeowner eventually.
“Development contributions can be a heck of a lot of money. Where I am, the Tasman District Council have just increased the contribution on new residential sections to $54,000.
“They also charge 5.5% plus GST of the independently valued value of each section for their Reserves Fund account, so their charges will be around $85,000 for each new residential section developed.”
It means starter homes in the next lot of sections he develops will start at around $500,000 and for the area that is terrible, Vercoe says.
But he points to Auckland, Queenstown, Wanaka and Wellington as being the more expensive parts of the country to build in for various reasons.
Auckland is more expensive because of labour costs, while Queenstown has logistical and freight issues and struggles to attract contractors due to its accommodation shortage, he says.
“In contrast, Christchurch is probably the cheapest area to build in. It has a competitive market, it has always had a good supply of trades, and it has an international port in Lyttelton which means freight is not a problem and a flow of product.”
Quantum Construction director Sam Sommerville, who is Auckland-based, is not convinced there are big differences in costs between different areas.
There are generally trade suppliers, such as ITM or Placemakers, across a reasonable radius of most regions, and there are local builders, he says.
“If it’s an area that is out in the wops, freight costs might be a bit more but labour costs are cheaper, so it balances out
“On my current job the client applied to Watercare to move his water meter two metres to the right, so it’s not in the middle of his driveway. He was quoted $15,000, and $7000 of it is traffic management.”