CoreLogic NZ Cordell Building Indices, August 2018

Cordell Building Indices

Cordell New Housing Index Price (CHIPS) New Zealand | June 2018

Contents Introduction to the Cordell Building Indices

3

Key Components

3

Cordell Housing Index Price

4

New Zealand CHIP

5

CHIP & Consumer Price Index (CPI) Figures

6

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Introduction to Cordell Building Indices

Key Components

The Cordell Building Indices (CBI) are a series of construction industry index figures that are used to monitor the movement in costs associated with building work within particular segments of the industry.

The indices are based on a comprehensive collection of labour, material, plant hire and subcontract costs covering all major trade categories within the segment being measured.

The CBI indicates the rate of change in prices within particular segments of the New Zealand construction industry.

Each of the trade categories contains labour, material and plant hire costs combined in typical proportions required to construct the various types of buildings commonly found within each segment.

The changes in prices are measured daily through the use of detailed cost surveys, and are reported on a quarterly basis. This ensures the most current and comprehensive industry information available.

Each index is based on a combination of labour, material, plant hire and subcontract services required to construct buildings within the particular segment being measured.

The CBI measures the change in the cost of constructing buildings, and as such do not provide the actual costs.

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Cordell Housing Price Index The Cordell Housing Index Price (CHIP) measures the rate of change of construction costs within the residential market and covers freestanding and semi-detached single and two storey dwelling homes.

The key categories within the CHIP index include: Preliminaries

Excavation and Concrete Work

Brickwork

Carpentry and Joinery

Roofing Insulation and Roof Plumbing

Windows and Glazing

Doors and Hardware

Plastering

Painting and Tiling

Plumbing and Drainage

Electrical Services

Sundry Appliances

CHIP Trade Breakup 25%

20%

15%

10%

Doors & Hardware

Windows & Glazing

Electrical Services & Sundry Appliances

Plastering

Painting & Tiling

Brickwork

Plumbing & Drainage

Roofing Insulation and Roof Plumbing

Preliminaries

Excavation & Concrete Work

0%

Carpentry & Joinery

5%

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New Zealand Q2

122.8%

0.9%

3.8%

June New Zealand CHIP Index

Quarterly Growth

Annual Growth

In nominal terms, the CHIP index rose 1.0% in the second quarter of 2018. The quarterly nominal growth in the index has been in decline since the June 2017 quarter, when the index saw its highest quarterly growth rate, of 1.9%, since the start of the back series in December 2012.

While quarterly growth in the index is slowing, the nominal growth rate is still marginally above the 5 year average of 0.9%. The index demonstrated a period of rapid growth over 2017, culminating in a 6.9% nominal increase in the cost of house construction over the year. Real growth in the index over 2017 was a staggering 5.2%, against a fairly subdued inflationary environment experienced in the New Zealand and global economy. In the June quarter, the nominal annual growth rate further eased to 5.3%, and real growth slowed to 3.8%.

Statistics New Zealand building activity data suggests that demand for dwellings in New Zealand remains strong, driven by continued demand from both multiple property owners (comprising 38.4% of sales in July 2018) and first home buyers (enjoying their highest share of sales in over a decade at 23.2% of sales).

Trend data of new dwellings consented across New Zealand shows a 3.0% increase over 2017. Demand continued to grow in the June quarter, with trend data indicating a further 8,576 dwellings consented, representing a 6.6% increase on the previous quarter.

While residential building has been the main growth driver in New Zealand’s construction industry over 2017, the non-residential building sector has also shown increased demand over the year. Alongside a 10.6% increase in the value of building work put in place over 2017 on the previous year, the value of work done in the non-residential sector increased 4.4%. This growth continued in the beginning of 2018 too, with an increase of 6.3% on the same quarter in 2017.

There are signs of a flattening off however, with concrete production in the first half of 2018 1.3% down on the same period 2017.

It is possible that the continued growth in the New Zealand CHIP index is partially driven by the increased dwelling demand and construction, with intensifying capacity constraints in the construction industry putting pressure on building inputs such as labour and material.

Above-average appreciations in the cost of house builds may continue, given that investment demand remains high, and the number of dwellings consented continues to increase.

In addition to investment demand, government initiatives such as Kiwibuild, earthquake re-building programs and increased infrastructure investment are also bolstering activity in the construction sector.

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New Zealand CHIP & Consumer Price Index (CPI) figures Based on 200m2 concrete slab, brick veneer, concrete tile roof house.

Year 2012 2013

2014

2015

2016

2017

2018

Months

NZ CHIP

NZ CPI

% Chg.

Index

DEC

0.0

100.0

% Year

% Chg.

Index

0.000

100.0 100.4

MAR

1.1

101.1

0.428

JUN

1.4

102.5

0.170

100.6

SEP

0.3

102.8

0.937

101.5

DEC

0.8

103.7

3.68%

0.101

101.6

MAR

0.4

104.1

2.99%

0.255

101.9 102.2

JUN

0.5

104.6

2.06%

0.304

SEP

1.2

105.9

2.98%

0.299

102.5

DEC

0.6

106.5

2.73%

-0.200

102.3

MAR

0.8

107.4

3.10%

-0.300

102.0

JUN

0.6

108.0

3.24%

0.400

102.4

SEP

1.0

109.1

3.03%

0.300

102.7

DEC

0.5

109.6

2.93%

-0.500

102.2

MAR

0.8

110.4

2.83%

0.200

102.4

JUN

0.3

110.7

2.52%

0.400

102.8

SEP

0.7

111.5

2.22%

0.300

103.1

DEC

0.9

112.5

2.62%

0.400

103.5 104.6

MAR

1.7

114.4

3.64%

1.000

JUN

1.9

116.6

5.30%

0.000

104.6

SEP

1.8

118.7

6.45%

0.500

105.1

DEC

1.1

120.2

6.87%

0.100

105.2

MAR

1.1

121.6

6.24%

0.500

105.7

JUN

1.0

122.8

5.28%

SEP DEC

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