Article: Speak Easy

It’s Costing More  And More To Build  – How Come? with Michael BoturIt’s Costing More And More To Build – How Come? with Michael Botur

CoreLogic data earlier this year indicated the cost of building a standard home in this country was 6.9% more in December 2017 compared to December 2016. In July 2018, Sudima hotel CEO Sudesh Jhunjhnuwala said building a hotel in NZ can be as much as 40 percent higher than in Australia.

“The cost of construction is one of the highest in the world,” Sudesh told Radio NZ. “It is ridiculous how much we pay per square metre.”

I wanted an opinion about whether, how and why build costs are going up, so I got Leigh Hopper of Hopper Developments on the phone.

Leigh– who’s busy building retirement villages at three locations including Marsden Cove, and is building his own place in the Coromandel - believes it used to be a lot easier and cheaper to build pretty much anything, from single storey three bedroom houses to two storey office blocks.

“The average house used to take, back in the day, three times the owner’s annual income to pay off,” Leigh says. “Today in Auckland it’s 10 times the owners’ combined annual income. In the regions it’s six times. It’s a different world today.”

That’s a fact – not just an opinion. The increase in building standards and health and safety regulations and bureaucracy driving up prices, though, is challenging to prove, although if we put the increase in permits required and the increase in building costs on a graph, there appears to be correlation.

On top of the costs associated with importing so much of NZ’s building materials, Leigh believes a slow-down in build times is attributable to earthquake-proofing, insulation requirements, double glazing, geotechnical requirements and planning processes.

“Everything you want to do today is subject to planning processes… Discretionary activity status invokes massive requests for information.”

Who pays? The person wanting to build.

When Leigh started building homes with kerb channel drains, footpaths, power, water and telephone lines, they were built with an engineer and a local surveyor who was also a planner. “The district plan was 30-40 pages thick and the surveyor/planner knew it intimately. Everyday endeavours were permitted; getting a complying building was relatively inexpensive. Today the Resource Management Act has an industry of experts to have managed to ensconce themselves in legislation and they’re adding to the costs.”

As a measure of RMA consents driving up costs, Leigh recalls buying land at Pauanui when the RMA was still just two years old, in 1993. He needed only eight total resource consents.

“Six years later, we applied to build almost the same at Whitianga. That invoked 24 resource consents. By the time the RMA had had 6-7 years in law, a whole new industry had managed to establish themselves and the regulatory agencies managed to think of new questions they could ask. Five years later at Marsden Cove, we had the same suite of issues – but this time 37 resource consents!”

“Just trying to build a three storey office here in Orewa, we’ve had to get a lawyer, planner, every man and his dog just to understand the boundaries…. The cost rises to $4500 per square metre – for an office!”

That freestanding home cost can be up to $3000 per square metre. Multi-storey building becomes vastly more expensive, with Leigh estimating up to $7000 per metre in costs which can mean a lot of compromises.

Having too many specialists spoiling the broth can over-complicate things, unless we’re talking about turnkey homebuilding franchises which have more reliable relationships with specialist contractors.

“When I first started in this business, one contractor would pour the concrete, dig the drains, cut the framing, do the roofing and cabinetry,” Leigh says. “We now rely on a dovetailing roster of specialists, trying to deliver the product in the shortest timeframe.”

Leigh feels at least the upper end of the building market is slowing down slightly. Still, if house prices fall and home owners suffer, will anyone be left happy?

Michael Botur has published journalism in NZ Herald, Herald on Sunday, Sunday Star-Times and Mana and he writes a lot of fiction. He moved to Whangarei in 2015 and was ecstatic to be able to afford a house here.

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