Building a house not getting cheaper
As many Cantabrians are finding out, it costs a lot to build a house and it's not getting any cheaper. Gideon Couper explains why.
How much does it cost to build a house in New Zealand? Tricky question. You might as well ask how long is a piece of string?
One thing is for certain - it will be more than you thought. Housing affordability is a hot topic at the moment. We are told how expensive it is to build a house in New Zealand and the Government is taking it seriously, appointing one of its top performers, Nick Smith, to the position of minister of housing. Good luck to him. I think he has an uphill battle ahead of him.
The simple fact is house building costs will continue to rise and there's very little anyone can do about it.
The cost of a house can best be understood if it is separated into three parts. First there are compliance expenses including council fees and the costs incurred by the need to commission surveys and reports.
Government, councils and industry people are always talking about getting compliance costs down, but costs keep rising and there are ever more expensive hoops to jump though.
I compared house permit costs for two houses on the same street in Christchurch. They were exactly the same, four-bedroom, two-bathroom, 230 square metre brick houses. The permit for the first in 2010, cost $4724. The second, in January 2013, cost $6395.
The first permit required seven plan pages and an exercise book of specifications costing $2300. An engineer's plan was also required and cost $600. That was it.
The second permit required 15 pages and a Bible-sized book of specifications (most of which was useless information) that cost $4300. The engineer's bill has risen to $1700 and could go higher depending on whether the council has further questions.
In some cases the council requires clients to get a deep-ground survey that costs about $20,000. All this and we haven't even put a peg in the ground.
What is the council doing with all that money and information?
Councils cannot be blamed for being overcautious. The leaky building crisis has cost them. I would be the first to look for higher building standards. We tried self-assessment in the past in an effort to introduce some competition and bring prices down but that failed dismally. I am surprised that the Government is even looking at implementing this practice again. So don't expect compliance costs to go down any time soon.
The second part of the cost of building is structure. If the leaky buildings crisis taught us anything it was use treated timber, and if earthquakes had a lesson for builders, it was brace the hell out of it. I personally only use H3.2 timber in my houses and fit ply right around the exterior. I reckon that makes a solid resilient house that will stand the test of time. It costs a little more and that's the story of structure. It's not one thing blowing out costs, but many. We now use about $1000 of little steel plates on a house. We didn't use them 10 years ago.
And we fix roofs on as if Canterbury is a hurricane area. We cover the exterior in all sorts of sticky tape in an effort to stop water getting in. The tape can cost $100 a roll.
During the boom times of the mid-2000s, Chinese businesses brought copper in vast quantities and drove up the price. That resulted in the cost of wiring rising every three months. You can imagine what that does to the electrician's bill.
We have all seen the price of oil rising and houses consume a lot of oil. Every delivery costs more, any product with petroleum in it costs more and every tradesman has to get to work and that's costing more.
When they get to work, they now have to spend more time than ever before on health and safety. For instance, every tradesperson working on the job has to have a 15-minute meeting on site safety every morning, take minutes of the meeting and sign them. We must assess each job for risks and fill out risk assessment job sheets and stick lovely little signs up. This means tradesmen are less productive as there is valuable time lost each day. The hourly rate required to keep good workers keeps rising which all adds to the finished cost of the build.
The list goes on, there's no one thing and there's no going back. So that brings us to complexity.
As Martin van Beynen commented recently in his column, "the ensuite was just the start". Houses have become bigger with more rooms, more gizmos and yes, more toilets. It's now not unusual for a four-bedroom house to have four toilets. Bedrooms may have four plugs, a phone connection and aerial point, the kitchen must have more plugs and probably a butler's sink just in case you need to hide the dishes. Televisions are hung on the wall and linked to internet so YouTube can be on tap. Soon fridges will have internet so you can order the groceries. Ceilings have high bits and floor tiles are huge and almost need cranes to be laid. If we expect all this, then it's going to cost.
Gone are the days of the three-bedroom, one-bathroom house. It just wouldn't sell. When clients ask me, "How much will my house cost to build?" Then I must ask "How complex do you want it, because complexity costs?"
A basic answer can, however, be given and it goes like this: The last house I finished cost $1440 per square metre. It was of average complexity, had four bedrooms and three bathrooms, with landscaping and fences included. It was on a flat site with easy access. That price is current but building costs are rising at about 1 per cent a month, notwithstanding council and code requirements.
I researched how housing cost have risen over the years. In 2001 it cost $820 a square metre. In 2009 it was $1030 and in 2010 it was about $1200. I understand insurance companies are working on $1520, as of last month.
Scary isn't it, and I haven't mentioned section prices. In 1999 a section of 800sqm could be bought in Rangiora for $58,000, now the same section will be more like $190,000.
Politicians talk a lot about bringing section prices down and that's all very well. Developers still must pay the council fees and jump though resource management hoops. They also must now make sure the land, services and roads can withstand seismic activity and none of this is cheap.
Maybe smaller sections and smaller houses are the solution but expectations will have to change. If the client looks a little green when the costs come in, I point out that by losing the extra bathroom you can slice $20,000 off the price and probably the same for the extra lounge. A simple three-bedroom house at, say, 160sqm with one bathroom should cost about $220,800.
But remember there are a lot of variables that can affect this and square metre rates are only ever an indicator.
It costs a lot to build a house in New Zealand and it's not getting any cheaper. The first step to reducing prices is to look at compliance costs.
Gideon Couper is a Christchurch builder with nearly 30 years experience. He has also been a National Party election candidate and has written children's books.