If you’re interested in building a new home, you need to know when the time is right. Following the unpredictable market rates, material shortages, and delays that have happened in the past few years, you may be hesitant to sign a construction contract.
You’re right to consider this carefully – it is a significant investment. To help you determine the right time for you, we discuss the current state of the construction industry and whether it’s the right time to build in New Zealand.
In this article, we cover why mortgage interest rates, budget blowouts, and timeline delays are putting some people off while also explaining how some people will benefit from building during this time. To find out if now is the right time for you, read the full breakdown below.
When to build a house
Building a house pays off in both quality of life and long-term financial gain because a new build house is customisable, energy efficient, and built to current Building Code standards. As house prices in New Zealand rarely go down and land during down periods is likely to be more affordable, the sooner you build your dream home, the better off you will be in the long-term.
It is impossible to predict market conditions and the price of materials so there is no point in trying to schedule your project around them. Instead, consider your financial position and living situation. Ultimately, the right time to buy or build a house is when you are ready, regardless of the market.
Mortgage interest rates NZ
New Zealand interest rates have been increasing since October 2021. This is an intentional effort by the Reserve Bank of New Zealand to manage inflation rates and restore balance to the economy. Unfortunately, this does mean many people are facing higher borrowing costs in the meantime.
As of August 2023, interest rates in New Zealand range from 6% to 9%. According to Mortgages NZ, floating rates currently range from 7.75% to 9.15%. Depending on the length of the term, current fixed rates range from 5.99% to 8.94%. You can use this mortgage calculator to determine how your interest rate will impact loan repayments.
When committing to a mortgage, high-interest rates can be worrying, especially for first-time buyers who have no existing equity. If you are a first-time home buyer or are planning to use a loan for the majority of your build project, consider saving more for your deposit and waiting until interest rates stabilise.
Find out how Genius Homes can assist you in financing a prefab
However, if you already have an existing property or enough savings, this may be a good time to lock in your project. With fewer people able to build, you can avoid the hassles that come with building during a construction boom.
Please note that these rates are subject to change and are only an indication of what you can expect from your bank. To get an accurate interest rate, speak with your lender directly.
Lower house values
If you don’t need a mortgage to fund your new home, now is an excellent time to build. According to the QV House Price Index, house values are relatively low right now, with the national average being 10.2% less than during the same period in 2022.
If you choose to build during this time, the value of your new home is likely to increase significantly in the coming years. This is particularly true for prefab homes where the build times are shorter and prices are fixed. In comparison, an on-site build progresses at a slower rate and may end up costing as much as it is worth.
Learn more about the benefits of prefab construction
Building costs NZ
In 2023, new dwelling consents have fallen by 10%, alleviating pressures on construction costs. The demand on the construction materials supply chain has been easing and builders’ workloads are slightly reduced. This means that cost growth isn’t as intense as it was in 2022.
The annual rate of change in the Cordell Construction Cost Index (CCCI) has slowed, now sitting at 6.4%. While that’s still above the decade average of around 4.5%, it is still down significantly from 10.4% in late 2022.
Timber and metal prices have stabilised in recent months. However, H1 insulation standards kicked in from the 1st of May which will potentially increase the overall cost of a project by 3 to 5%. While the cost of building won’t be cheaper overall, you can be confident that costs won’t increase rapidly like they did in 2021 and 2022.
Hidden costs of building a home
The true cost of building a brand new house is often more than your building company quotes. This is because of the unpredictable nature of on-site construction projects and the hidden costs that can crop up, including:
- Groundwork
- Project overruns
- Increased material costs
- Contractor travel time
- Consent and compliance
- Design edits and customisations
Once you factor these additional costs into your total project costs, the amount can be overwhelming. Fortunately, you can have a fixed-price contract with a prefab building company to avoid unexpected fees.
Prefab homes NZ
Prefab homes are fully built in a controlled factory environment so the prices can be fixed before construction starts. There may be slight price variations in the groundwork but, with no concrete slab, it’s usually reduced compared to a traditional build anyway. This is something that can also be quoted at the time of sale to ensure there are no unforeseen costs. However, this may slow down the sales process slightly and there will be some upfront costs to determine the ground conditions.
The benefits of prefab homes include:
- Faster construction
- Low travel costs
- Efficient building techniques
- Consent and compliance included in the price
- Customisable plans
- Minimal disruption to your building site
- Minimal material waste
At Genius Homes, we also have complete transparency about the standard inclusions in each of our prefab homes. We also project manage everything for you, including the design, consent, and building process, as well as site works and delivery.
Find out more about the prefab approach in our Ultimate Guide to Choosing a Prefab or explore the full range of house plans on our website. Get in touch with our helpful sales team today to decide whether you're ready to start your dream home journey with Genius Homes by clicking the link below.
