Builders busier again as new dwelling consents rebound
Construction costs rose at their fastest quarterly pace in more than a year in the three months to December, adding to early signs that the residential building sector is starting to recover.
The latest Cordell Construction Cost Index (CCCI) shows residential building costs increased by 0.9% in the three months to December. That is the largest quarterly rise since Q3 2024 (1.1%), although still slightly below the long‑term average of 1.0%.
On the back of this, the annual pace of growth lifted to 2.3% from 2% in the third quarter of last year, remaining well under the long‑run average of 4.1% per annum since late 2012.
The latest construction figures arrive as residential property values also begin to stabilise, with QV’s House Price Index showing modest value growth in the December quarter after much of 2025 was flat or falling.
Cost pressures remain contained after post‑COVID surge
Cotality chief property economist Kelvin Davidson (pictured) said that while construction costs are still rising, the pace is relatively 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," Davidson said. “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.”
Dwelling consents turn higher after earlier decline
One of the clearest signs of a shift in momentum is the turnaround in new dwelling approvals.
Recently, the 12‑month rolling total for new dwelling consents has started to rise again, reaching more than 35,500 in October. Davidson said this follows a period of stagnation – albeit at a high level – through late 2024 and the first half of 2025.
“After peaking at more than 51,000 in the 12 months to May 2022, the number of new dwellings consented dropped to a low point between 33,500 and 34,000, ” Davidson said. “We are now seeing a recovery that aligns with anecdotal evidence that builders are becoming busier again.
“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.”
Construction sector poised for recovery in 2026
Looking ahead, the data points to a construction sector that is gradually moving back into an expansion phase. Davidson said the earlier downturn has helped take some heat out of the cost cycle after several years of strong increases.
“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. However, a spike similar to the post-COVID phase remains unlikely,” the Cotality economist said.Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
