Building Costs Rise as Material Prices Increase in Late 2025

The cost of building homes has begun to rise, driven by increasing prices for materials such as timber and cladding, according to the latest data from QV CostBuilder. Their report indicates a notable uptick in construction costs during the final quarter of 2025, which could signal a trend as the sector prepares for 2026.

In the quarterly update for November, QV CostBuilder analyzed around 15,600 material and labor prices from its extensive database, which includes over 60,000 rates across major New Zealand cities like Auckland, Hamilton, Palmerston North, Wellington, Christchurch, and Dunedin. The state-owned enterprise reported that it made approximately 14,500 updates to its data for the six cities, focusing on Cost Planning and Detailed Trade Rates.

The average construction cost for a standard one- or two-storey home, ranging from 150 to 230 square meters, rose by **0.5%** over the three months leading to the end of November. Annually, this represents a **1.1%** increase, contrasting sharply with the **38%** surges experienced between 2020 and 2024.

Signs of Market Movement

Martin Bisset, a quantity surveyor at QV CostBuilder, noted that the market is beginning to exhibit early signs of upward pressure after experiencing a prolonged period of stable or declining 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 stated.

The latest data reveals that while construction inflation cooled over the past year, certain areas of the market are tightening again. In particular, structural timber prices increased by **5.2%**, proprietary cladding systems by **5.0%**, and concrete by **4.5%**. Conversely, plumbing materials saw a decline of **1.5%**, primarily due to a significant drop in the price of PVC tanks, which decreased by **36.1%**.

Bisset explained that the overall construction costs remain stable, although there is a noticeable shift in the mix of costs. “What we’re seeing is less a broad-based rise, and more a patchwork of increases and decreases,” he added. For builders and developers, this means while the total cost of projects may not drastically change, the distribution of those costs is evolving.

Impact of Regulatory Changes

Proposed amendments to the Building Act, including shifts from joint-and-several liability to proportionate liability, could further influence construction costs in the future. QV suggests that while these reforms aim to enhance fairness and reduce council exposure regarding construction defects, their implementation may introduce new compliance costs.

“Any regulatory change tends to create uncertainty before it creates efficiency,” Bisset noted. He warned that the potential introduction of warranties and insurance requirements might lead to increased costs for developers and homeowners. Conversely, he explained, improved risk-sharing could reduce delays and disputes over time.

Looking ahead to 2026, Bisset expressed optimism, especially following recent reductions in the Official Cash Rate (OCR), which has been lowered to **2.25%**. “With low construction inflation, 2026 will be a good time to build,” he stated, emphasizing the potential for stable costs in the coming year. The Reserve Bank has indicated that this rate cut is expected to have a moderate influence on future house price growth.

Nonetheless, Bisset cautioned that if there is a rush to build, the construction sector must have sufficient capacity to meet demand. “If there isn’t the capacity, it could lead to the cost increases we saw in the early 2020s,” he said.

While costs for non-residential buildings, excluding educational facilities, have remained stable, rising modestly by **0.5%** in the November quarter and just **0.8%** over the year, Bisset reminds stakeholders that all figures represent averages. The final construction costs will ultimately depend on various factors, including the quality of finishes and internal layouts.

As the construction industry navigates these changes, the focus remains on balancing cost stability with the evolving demands of the market.