The Numbers
Between 2015 and 2025, national construction costs in New Zealand increased by 61 percent. Over the same period, the Consumer Price Index rose 33 percent. The 28-percentage-point gap means construction cost inflation ran at approximately 1.8 times the pace of general inflation — a divergence that has compressed margins, strained client budgets, and contributed to project deferrals across the residential and commercial sectors.
QV Cost Builder quantity surveyor Martin Bisset described the gap plainly: “Building-cost inflation has been running well over one and a half times the pace of overall inflation.” That framing makes the challenge concrete for builders trying to hold margins while clients compare 2025 quotes to 2019 expectations.
Where the Costs Went
The increases have not been evenly distributed across materials. Some categories have experienced extraordinary price growth:
- Cedar weatherboards: from $17 to $53 per metre — a 212 percent increase
- Radiata pine clear flooring: up 122 percent
- Shadow-clad exterior plywood: up 110 percent
- Steel sheet roofing: up 76 percent
- Windows: up 72 percent
- Plywood: up 12 percent
Construction labour costs rose approximately 35 percent over the same period — significant, but less extreme than some material categories. The supply chain disruptions of 2021-2022 are the primary driver of the most severe material cost increases, though global commodity prices, exchange rate movements, and domestic timber supply constraints have all contributed.
The Recent Moderation
From 2023 onwards, the pace of cost growth has slowed dramatically. Annual construction cost increases through 2024 and 2025 have been running at approximately one percent — a fraction of the three to five percent annual increases recorded through the peak years. This moderation reflects softening demand, supply chain stabilisation, and the lagged effect of reduced raw material price pressure.
Chief property economist Kelvin Davidson described the change as producing “greater confidence in quoting, budgeting, and delivery.” That confidence matters. When costs are escalating rapidly and unpredictably, builders either build excessive contingency into quotes (making them uncompetitive) or absorb losses when actual costs exceed estimates. Stable costs support better pricing discipline across the sector.
Regional Variations
Canterbury has experienced more modest cost increases than high-demand urban markets like Auckland. The 38 percent increase in Canterbury against a national 61 percent reflects the combination of more stable land costs, a more predictable consenting environment, and less extreme demand pressure. For builders operating in multiple regions, the regional cost structure affects where and how they price competitively.
