The rise in construction costs could hit double digits this year after increasing at the fastest rate in almost four years.

Last year alone, construction costs rose 6.1%.

The high costs come from a rise in timber prices and record building consents, according to new data from the Cordell Construction Cost Index.

With an already overheated housing market, expensive construction costs are expected to add further affordability challenges.

A tightening up of the supply chain and capacity restraints have also caused costs to increase, as well as strong demand for new housing encouraged by government rules allowing investors to still claim interest as a deductible expense and keeping the bright-line test at five years.

It’s a perfect storm of demand and supply. Industry pundits say they wouldn’t be surprised if costs rose 10% this year because builders have more than enough work and materials are in short supply. Adding to builders’ woes, Fletcher-owned Winstone Wallboards, the country’s biggest supplier of Gib plasterboard, is rationing supplies.

Order Backlog

Winstone’s customers were told in January it wouldn’t deliver on any new orders before the end of May; now it says it won’t take advance orders at all.

The company says the lockdown created a backlog of orders to pick and deliver and resulted in longer lead times.

Winstone says record manufacturing output, coupled with finding some product from an overseas manufacturing source, has not been enough to keep up with the level of forward ordering. It has also been unable to halt increases in lead times.

It says from July the supply of Gib plasterboard, including the external Barrierline and Weatherline ranges, will only be available through an “allocation model”. The company will not accept or process new orders for July deliveries onwards.

From June it will accept orders for the subsequent month, but those orders will be prioritised. It comes at a time when an investor or an owner-occupier can get into a new build with a reduced deposit compared to buying existing property.

There is a lot of government incentive for buyers to go down the new build path, just as costs rise and borrowing is more difficult, but it is unlikely to put people off.