Why Are Building Costs Still Rising in a Down Market?

Why Are Building Costs Still Rising in a Down Market?

Despite a slowdown in residential construction activity across much of New Zealand, building costs continue to rise. For many builders, developers, and homeowners, this feels counterintuitive—shouldn’t quieter workloads mean cheaper prices? In reality, the market tells a more complex story.

The State of the Residential Market

As of mid-2025, demand for new housing has dipped in many regions—particularly Auckland, Wellington, and Christchurch—as higher interest rates and tighter lending slow buyer activity. Builders are seeing fewer new enquiries, and some projects are being postponed or shelved.

Yet despite this, the cost of building remains high—and in many cases, is still increasing. Why?

What's Driving the Cost Pressure?

1. Material Prices Haven’t Reversed
   Prices for key materials like timber, gib, insulation, and steel surged over the past few years. While supply chains have stabilised, most suppliers have held their margins. Contractors are paying similar—if not slightly higher—rates than they were at the peak of the boom.

2. Labour Shortages Remain
   Even with fewer projects starting, there’s still a shortage of skilled labour across New Zealand. Builders are struggling to retain qualified staff and subcontractors, especially as some trades chase higher-paying infrastructure or commercial jobs.

3. Risk Margins Have Increased
   With a more competitive and uncertain pipeline, many builders are pricing risk into their quotes. This includes allowances for inflation, potential delays, and even client indecision. When margins are thin, there’s little room for error.

4. Regulatory Costs and Compliance
   Building to current code and consenting requirements continues to add cost—especially in high-performance homes or complex renovations. Compliance is non-negotiable, but it's often underestimated in early-stage budgets.

The Role of a Quantity Surveyor in This Environment

In this climate, getting clear, independent pricing advice is more valuable than ever. At Measured Consultancy, we help builders and developers:

• Understand true build costs before committing

• Benchmark pricing across suppliers and subcontractors

• Avoid over- or under-quoting, especially when workloads are light and competitive pressure is high

• Negotiate fair rates with trades by providing third-party validation

We’ve seen first-hand how transparent cost planning leads to better decisions—and better relationships.

Building Relationships, Not Just Estimates

We’re also seeing a shift in how builders work with consultants like us. In a softer market, collaboration and trust are key. Builders who engage early with a QS are able to quote faster, reduce surprises, and focus on delivery rather than constant pricing admin.

Final Thoughts

It may be a quieter market—but that doesn’t mean it’s cheaper to build. Whether you're a homeowner, builder, or developer, getting the right pricing advice early can save money, time, and stress down the line.

Need help pricing a job or understanding your project’s feasibility?
Get in touch with Measured Consultancy—we’re here to support builders and developers through every market cycle.