Housing construction costs in Christchurch are spiralling out of control as earthquake rebuilding efforts continue to gather momentum, the latest report by a government department suggests.

In its Housing and Construction quarterly, the Ministry of Business, Innovation and Employment in New Zealand says that on a square metre basis, the cost of building a house in Christchurch has risen by 11.3 per cent over the past 12 months and the city has now overtaken Wellington in terms of residential construction costs – a phenomenon it puts down to increasingly tight markets for labour and materials.

“Christchurch’s construction costs are increasing faster than the rest of the country,” the Ministry says in its report. “These cost increases are the result of increasing construction volumes in Christchurch and limits in the supply of key building materials such as concrete and timber, and more importantly labour.”

NZ house costs per city

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The report underlines the impact the rebuild has had on the nation’s construction industry.

It shows that compared with 12 months ago, new housing consents in the Greater Christchurch area were up 64 per cent in the December quarter, while approvals for renovation and restoration of existing homes had almost doubled and those of commercial buildings and civil infrastructure were up 30 per cent.

In total, since September 2010, around $NZ655 million in new homes and existing house restorations specifically relating to the rebuild has been approved along with $750 million in commercial building and civil construction works.

Not surprisingly, this is pushing up wage costs – which have risen almost twice as much in Christchurch (4.9 per cent) than the national average (2.6 per cent) over the past 12 months.

Indeed, a special list maintained by the Ministry specifically for the rebuild lists 34 categories in which it says shortages of skills exist, including not just building surveyors, managers and engineers but also 19 classes of trades in areas such as bricklaying, carpentry, joinery, drain laying, electrical, plastering, glazing, tiling, metal fabrication, scaffolding, painting, welding and stone masonry.

Going forward, the Ministry says while an inward migration of workers and materials suppliers bought about by higher wage and price levels may see supply pressures ease in the medium term, short term pressures on costs are unlikely to abate.

Moreover, while longer term inward migration may help Christchurch, the Ministry warns it would add to cost pressures elsewhere.

“If the supply of construction remains constrained, and demand continues to increase as the rebuild get into full swing, then we can expect construction costs to continue to increase,” the Ministry says in its report. “In the medium term, any further increases in construction costs in Christchurch are likely to help alleviate any supply shortages by attracting extra labour and materials into Christchurch.”

“If this does occur, the effects of increasing construction costs from the Christchurch rebuild is likely to be evenly felt across the country, with less supply available in Auckland, Wellington and other regions.”