New residence homeowners face rising constructing prices till development slows

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Ryan Southey and Breifne McConnon had just got the roof of their new home when the lockdown began.

The painters returned to their rural Masterton home on Wednesday and resumed work.

“All of the outside is done and the gibbing was done from the inside so it went through to the painting phase. It would have been about eight weeks to the end. ”

Construction companies report coordination problems and building material deficiencies that can increase costs.

DAVID UNWIN / STUFF

Construction companies report coordination problems and building material deficiencies that can increase costs.

Southey says he is grateful that his house is so advanced. Another new building nearby is in a much more formative condition.

CONTINUE READING:

* * The builders hope customers won’t leave them when they come out of the lockdown

* * The Covid-19 response provides an opportunity to address the New Zealand real estate crisis

He hopes it doesn’t cost more than it has. ” We haven’t heard anything about price changes. I think as far as I operate we have a fixed price contract for everything. This is how I operate in my head. ”

According to construction companies, those in the middle of completing a home could face higher costs due to the effects of the lockdown due to delays and material shortages.

Before the lockdown, construction costs rose 3.6 percent annually, reflecting the hot construction sector.

Ross Giblin / Stuff

Before the lockdown, construction costs rose 3.6 percent annually, reflecting the hot construction sector.

In the long run, however, economists say the construction sector is “clearly” facing a slowdown, which should lower construction costs.

CoreLogic senior economist Kelvin Davidson says the latest figures from the Cordell Housing Price Index show construction costs rose 1 percent in the March quarter.

In fact, costs were starting to reflect the surge in construction, which had increased by at least one percent in 11 of the last 13 quarters.

This meant that construction cost inflation was 3.6 percent annually through March, well ahead of general inflation of 2.5 percent.

It was better than 3.9 percent in the previous quarter, however, and has improved significantly from the 6.9 percent that construction costs reached in the last quarter of 2017.

However, Davidson believes that these cost increases are likely to subside as projects take a back seat.

“Funding will be difficult and some projects have already been put on hold due to coronavirus uncertainty.

” A decrease in activity will, in turn, reduce the pressure on capacity and manpower and ultimately lead to reduced cost pressures. “

Before the closure, the costs were driven by the high level of construction activity.

Those in the middle of a home construction may face a higher bill due to security, delays, and bottlenecks.

John Kirk-Anderson / Things

Those in the middle of a home construction may face a higher bill due to security, delays, and bottlenecks.

House approval approached 38,000 a year, the highest since September 1974, and nearly three times the July 2011 low when only 13,236 homes were approved.

“It’s not just new homes that are booming – approval for changes and additions was at historic highs even before the lockdown,” he said.

Non-residential construction was also pretty strong at $ 7.1 billion last year, up from $ 1 billion year over year.

But from now on things were no longer expected to be so rosy.

Paul Southey, owner of Greytowns A1 Homes and Wairarapa president of Registered Master Builders, said higher costs for those in the middle of a construction were likely in the short term.

Securing sites, impending material shortages, and a dispersed workforce added costs and, in his case, delays of up to a month that would add to people’s mortgage costs.

” In this phase we try to absorb and reduce the costs for the customer. Due to the bottlenecks, there will be price increases. There are delays with some products.

” Of course we won’t be able to bear all the costs and we have to share the burden on some of our customers. ”

Ironically, during the lockdown, more and more people were dreaming of new homes and making inquiries.

Ross Giblin / Stuff

Ironically, during the lockdown, more and more people were dreaming of new homes and making inquiries.

Grant Porteous of GJ Gardner, the country’s largest construction company, said the prices of building materials have rarely fallen. In fact, he watched them increase during the global financial crisis.

However, the supply chain was competitive and well-run companies that paid their bills should be able to resolve the sourcing issues.

One surprising positive result from Lockdown is that builders actually signed contracts because people had downtime to dream and plan.

GJ Gardner signed 44 new electronic signature contracts, and Southey says his company’s requests for lockdowns have doubled.

But later there were bigger concerns.

“What I think the market, including us, will see is a significant drop in new inquiries,” Porteous said.

“The concern for all of us is what will happen in six months,” Southey agreed.

“ It depends on sales, it depends on what the market is going to do, it depends on what the banks are going to do.

“If you say that 250,000 people will be unemployed in New Zealand, it affects everyone.”