Off the plan buys likely to rise

For those struggling to find a home in Auckland, building new has become an increasingly attractive option - mainly because you don't need as large a deposit to build a house as you do to buy. And of course you get a brand new home that will need minimal maintenance in the short term.

For owner-occupiers, a new build requires a 10 per cent deposit compared to a 20 per cent deposit to buy an existing home. Investors may require as little as 20 per cent deposit to purchase a new build, compared to a 40 per cent deposit under new loan-to-value requirements to buy an existing home.

Many buyers purchasing off the plans over the past couple of years have been finding their home value has increased significantly by the time the build is completed, so that's another positive incentive to purchasing a new build.

And with the new Auckland Unitary Plan having just been passed there's now certainty in terms of what can be built, where, in the city. It also means there is likely to be an increasing number of opportunities to buy off-the-plan as well as an increase in sections available on the market in the coming months and years. As opposed to renovating an existing house on a site, more Aucklanders will also have the opportunity to build in different ways on that same piece of land, which will mean the intensification of land use will happen more quickly.

For those looking at the idea of finding a section and building a home or buying new off-the-plans, the question they will have is how much will it cost to build a home over and above the price of the land?

New QV costbuilder data released for the first time this month shows the long-term trends in the cost of building homes in New Zealand's four largest cities.

QV costbuilder provides the latest construction cost data to property professionals through an online subscription tool. It tracks the cost of a huge range of residential dwellings and also provides costs on industrial and commercial buildings.

It shows the average cost to build a standard 140sq m, three-bedroom, one-bathroom home in Auckland is $266,000, compared to $272,125 in Christchurch, $252,000 in Wellington and $248,500 in Dunedin. And that after peaking in 2007, the cost of building a new home dropped between 2008 and 2010, following the global financial crisis.

The cost then jumped by as much as 20 per cent between 2011 and 2012 when the Christchurch rebuild got under way. That year the cost of building a standard 90-130sq m home in Christchurch jumped 21.63 per cent; in Auckland it rose 14.29 per cent; in Wellington it increased 11.02 per cent and in Dunedin it climbed 10.20 per cent.

Since then residential building costs have continued to rise annually at a rate of between 1.5 per cent and 5.5 per cent a year, across all the various QV costbuilder categories.

One thing the data doesn't include is the cost of land, and land values have not only risen rapidly in recent years along with home values but they also vary hugely across Auckland.

One thing to keep in mind when building is that the value is in the location of the land.