It is not just the number of new homes being built that is declining, major alteration work on existing homes is also in decline, although the amount of money homeowners are spending on alterations continues to rise.
According to the latest building consent figures from Statistics NZ, building consents were issued for 37,239 new dwellings last year, down 25% compared to 2022.
Building consents are also required for structural alterations to existing residential properties.
They are not required for mere redecorating, such as painting or replacing cupboards and benchtops.
But they are required for work altering the structure of a building, such as extending a dwelling or building a garage.
Building consents for alteration work have also been declining, but at a slower rate than consents for new dwellings.
Last year 26,540 consents were issued for 26,540 residential alterations. That's down 9.4% compared to 2022, and down 15% compared to 2021, and was the lowest number of alteration consents issued in a year since 2016.
Residential alteration work reached peak popularity over the three years from 2004 to 2006, when almost 34,000 consents a year were issued, but from 2008 onwards the numbers began a fairly slow but steady decline.
However, while the number of residential alterations is declining, the amount of money being spent on them continues to increase.
The average amount spent on residential alterations last year reached an all time high of $94,759, up 11% compared to 2022, and up 22% compared to 2021.
Which meant that even with the fall in the number of alteration jobs consented over the last two years, the total amount being spent on such work kept increasing, hitting a record high of $2.515 billion last year.
However the annual increases in alteration spending is starting to flatten out too, being up just 0.8% last year compared to 2022, while total spending in 2022 was up 3.1% compared to 2021.
If those trends continue this year, building firms will no longer be able to rely on an increase in revenue per job to keep their own turnover up, even as the number of jobs they are undertaking falls.
And that could start to put a squeeze on the finances of some building companies and their suppliers.
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13 Comments
Its getting too expensive to renovate - the cost of the renovation now exceeds any uplift in capital value you will achieve from it. I'm hearing a lot of project costs are coming in so high that its actually more financially viable to knock down the existing property and rebuild from scratch, but at that point most people just decide to buy something else.
And on the smaller end of things, consent costs are now so high that even a simple reno has become unaffordable. A lot of people are choosing to upgrade kitchen and bathrooms without doing any work that requires consent (like not tiling or adding another kitchen sink).
Signature Homes quoted me $7k/sqm on the weekend for a new build. Including GST, excluding land. So a 260sqm is $1.8m + land.
Knocking down your house and rebuilding is probably going to be one of the worst economic outcomes.
"If those trends continue this year, building firms will no longer be able to rely on an increase in revenue per job to keep their own turnover up, even as the number of jobs they are undertaking falls."
Does that mean the new-age builders who now do renos won't be able to extort their customers to buy the new Ranger, boat, or Jetski they crave so much or go on their European and ski holidays as they have become accustomed to each year😊
As someone that is currently building and paying those costs, that's not the part I begrudge. Its the material costs that get me.
While many builders have a nice toy or two, I don't really see that as being wealthy. Most builders are just trying to get by.
The envy and schadenfreude seems particularly strong today Mr Ed.
Wonder if he complains about his lawyer having a couple of toys and yearly trips to Bali.
What I hope we see is a focus on completing jobs quickly. A Landmark build near me is more than 18 months in and still has a way to go. The Signature Homes house next to it is also taking ages. Both are in an affluent suburb. Neither have had builders on site this week. The cost of delivering these projects so slowly just seems to be ignored.
Prior to covid I did a lift-and-shift of an old house so three new townhouses could be built at the rear. Almost complete when covid struck and sale completed soon after lockdown ended. The old house, 1920s/30s, is sitting at the front of the section, inhabited, but only just meeting HH standards, so very cheap rent for the area.
I got quotes for a reno - actually more of a remodel - for the old house just before covid and went "ouch". Yes, prices were going up then too. After lockdown ended I asked for the quotes to be updated. Absolutely horrendous! Sat down with the builders and went through them line by line. I'm not a charity so it went into the bottom draw. The builders understood and the tenants were thrilled. The builders have been back in touch recently. I explained that until finance costs come down my ROI target wouldn't be met but I'll get back to them when it is met.
This work was consented before covid. And it still hasn't started.
How big was the house you shifted, and how much did it cost? Ta
Dangle the cash in front of them and when they laugh at the price you offer, give them 6-12months and they'll ring back when that reality check comes full circle and there are too many around with not enough work.
There is not really a lot of room to move for most of these guys. Labour costs are up and wont come down because the cost to live is so high. Material costs are up and... ?
Tell me about it. I'm getting an addition to a 1940s house in Otago. The work comprises laundry, small shower/toilet, porch, entrance.
Including demo costs for existing laundry, and GST, the price is $130,000 - for 24 sq m.
ie $5,400 psm.
Excludes consent, inspection fees.
😲
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