1 Dec 2011

Prediction construction costs could start easing

7:09 am on 1 December 2011

An economist says construction costs could start easing due to the slowing global demand reducing pressure on raw material prices.

Official figures show building consents for new homes and apartments jumped a seasonally-adjusted 12% in October compared with the same period a year ago.

While the number of consents are still about 40% below historical averages, ANZ New Zealand senior economist Mark Smith says the building sector is gradually recovering, led by the upper North Island.

He says Canterbury is a key focus, but the October figures are disappointing with only about 13 new earthquake related dwellings being authorised.

Mr Smith says Canterbury will become a key growth area, but for the moment issues such as insurance are delaying growth.

He says construction costs remained in check, rising 2% to average $1444 per square metre.

Mr Smith says there's been a tailing off of residential construction costs which are only up about 2.1% from a year ago.

He says anecdotally there have been higher raw material costs, but a weaker world economy may mean that lower cost raw materials will start to come through.

Mr Smith says there still seems to be building capacity available around the country, although it will vary by region.

He says a slowdown in construction in Australia will help New Zealand by ensuring this country keeps most of its builders.