Currently in April 2023 we have a New Zealand inflation rate of 6.7% which is slowly coming down. In December the rate was 7.2%. This is a figure covering all sections of the economy.

The construction sector has for the past year or more suffered a much higher rate of inflation than the general economy. Labour shortages and material supply problems have resulted in longer build times and higher inflation in the construction sector.

Recent CoreLogic figures which monitor the price to build a standard 1 level 200m2 brick and tile house show current inflation at 10.4%. This is falling too as it was over 17.0% this time last year.

Just as these inflation costs start to slow down there are further rising costs for building coming into effect this year. Starting in May (interim step) with full implementation in November this year.

These are changes to section HI of the New Zealand Building Code. The changes increase the level of insulation needed for doors, windows, walls, floors and roofs.

Windows and doors (all have to be double glazed) will require higher R values (thermal resistance). This means using more thermally resistant glass and window frames and replacing the air gap between the double glazing with gas to improve performance.

These changes will of course add to the cost of building. Given these increases in the cost of building it is obvious that the current falling house prices will soon come to an end.

Existing houses will become more attractive pricewise than new builds. This will result in falling demand for new builds and construction will slow down. It is in fact already happening. The upwards trend of the house price cycle, where prices are rising will then follow.