Construction inflation stays low but key materials edge higher
The cost of building a home is starting to edge up again, with QV CostBuilder’s latest data showing the first signs of upward pressure as timber and cladding prices rise in the final quarter of 2025.
In its November quarterly update, QV CostBuilder applied about 15,600 current material and labour prices to its database of more than 60,000 rates across Auckland, Hamilton, Palmerston North, Wellington, Christchurch and Dunedin.
That resulted in around 14,500 changes – or 23.8% of rates – across the six centres in the Cost Planning and Detailed Trade Rates sections.
The average cost of constructing a standard one- or two-storey 150–230m² home in these centres rose 0.5% over the past three months and 1.1% over the past year, a mild increase compared with the 38% surge recorded between 2020 and 2024.
QV CostBuilder quantity surveyor Martin Bisset said the market is starting to move after a long stretch of flat or easing costs.
“It’s not a surge by any means, but we’re starting to see some early signs of cost pressure returning – particularly in timber, cladding systems, and some specialist finishes,” Bisset said.
“For the past year, we’ve seen a general cooling in construction inflation, but the latest data shows pockets of the market are tightening again. These aren’t dramatic shifts, but they’re worth watching as activity begins to firm heading into 2026.”
Timber and cladding up, plumbing down
The quarter’s largest price drops were in plumbing materials, which fell 1.5%, driven by a sharp fall in PVC tank prices (–36.1%) and lower Buteline pipe fitting costs (–8.1%).
By contrast, key increases included:
- Structural timber (+5.2%)
- Proprietary cladding systems (+5.0%)
- Concrete (+4.5%), partly due to higher waterstop prices
- Diesel (+3.0%)
- Painting and specialist finishes (+2.3%).
Bisset said the headline inflation numbers remain low, but price changes are now appearing more frequently, and rises in core materials like timber can have an outsized impact.
“What we’re seeing is less a broad-based rise, and more a patchwork of increases and decreases. There are more rates rising than reducing, but overall construction costs are stable,” he said. “For builders and developers, this means the overall cost of a project may not change much, but the mix of where those costs sit is shifting.”
Regulatory reforms could influence future costs
Bisset said proposed changes to the Building Act could also affect construction costs over time. These include a shift from joint-and-several liability to proportionate liability, along with mandatory warranties and professional indemnity insurance for design professionals.
While the reforms are intended to improve fairness and reduce councils’ exposure to construction defects, the way they are implemented will be crucial.
“Any regulatory change tends to create uncertainty before it creates efficiency,” said Bisset.
“If warranties and insurance requirements add new compliance costs, those will almost certainly be passed through to developers and homeowners. But on the other hand, more proportionate risk-sharing may reduce delays and disputes down the line.”
2026 tipped to be a good year to build
With recent OCR reductions and subdued construction inflation, Bisset expects next year to be favourable for those planning to build.
“2025 has been a year of stability, and it is very likely that 2026 will be another year of low construction inflation,” the QV leader said. “With the OCR recently having been lowered again to 2.25%, 2026 will be a good time to build. The Reserve Bank has stated it expects this rate cut will have a moderate effect on the future growth of house prices.”
Stats NZ figures also show 35,552 new homes were consented in the year ended October 2025, with townhouses, flats and units driving most of the growth as the construction cycle begins to turn.
However, Bissett cautioned that a sharp upswing in building activity could quickly change the cost landscape if the sector is stretched.
He warned the danger with a low OCR is that if there is a rush to build, there needs to be enough capacity in the sector to cope. “If there isn’t the capacity, it could lead to the cost increases we saw in the early 2020s,” he said.
Non-residential costs remain subdued
Non-residential building costs (excluding educational buildings) remain broadly stable, rising 0.5% over the quarter and just 0.8% over the past year.
“Bear in mind that all of these figures are averages and the true cost of construction will always depend on the level of finishes, internal layout, and all manner of other elements,” Bisset added.
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