This is a significant improvement from the peak of 10.4 per cent in late 2022.

The latest Cordell Construction Cost Index shows the June quarter rise was in line with the March figures but well below the average quarterly increases of 2 per cent recorded in 2021 and 2022.

Dwelling consents have fallen 10 per cent to less than 46,000 this year, but CoreLogic’s Chief Property Economist Kelvin Davidson says the number remained high compared with post-GFC figures of 14,000.

“Although the actual volume of building work has started to drop, the construction industry is still busy as it works through the pipeline of previously approved consents,” he says.

In May, Auckland Council issued 1,499 Code of Compliance Certificates for new dwellings. It is the highest number issued for a May month since the council started keeping figures.

Davidson says the widely anticipated slowdown in consents has alleviated some pressure on the construction materials supply chain in recent months while also slightly reducing workloads for builders, which means growth in costs isn’t as intense as it was last year.

Last year’s quarterly rate of increase averaged about 2.5 per cent, compared to the 0.6 per cent rate of growth in each of the two quarters of 2023 so far.

From a material perspective, Davidson says timber prices have stabilised this year, with some structural timber costs falling. Similarly, metal prices have also remained steady or fallen slightly, with some drops for structural steel.

Changes to the H1 energy efficiency and insulation standards, which kicked in on May 1, could have the potential to add 3-5 per cent to the overall cost of a standard build.

“It’s possible that the overall CCCI may well have slowed even further in the second quarter had it not been for the new roof, window, wall and underfloor insulation building code changes,” he says.

Davidson says the number of new dwelling consents is likely to fall further and as the pipeline of construction comes to completion, workloads will also continue to moderate over the next two to three years.

The ease in demand and opening on capacity for builders will restrain construction costs, but he noted the impact of migration flows on labour supply is a trend that will need to be watched closely.

“The expectation is the quarterly rate of change in the CCCI will continue to grow about 0.5 per cent for the rest of this year, taking the annual change to less than 3 per cent by the end of the year.

“That’s not going to mean the cost to build a new home is going to be cheaper, but it does provide some reassurance to buyers costs won’t increase at the same rapid rate we’ve experienced in the past two years.”