COVID-19 pandemic seeing more Kiwis choosing smaller homes as construction cost rise

A property expert says the COVID-19 pandemic is seeing more Kiwis choose to build smaller homes as construction costs skyrocket. 

Building costs are going through the roof thanks to a perfect storm of demand inflation and pandemic supply issues. 

CoreLogic latest supply data released on Wednesday showed costs have risen 6.1 percent in the last 12 months - the biggest jump in four years.

Registered MasterBuilders chief executive David Kelly told AM on Wednesday that with construction costs rising, many people are adjusting their expectations and choosing to build a smaller home.   

"I had a discussion with a volume builder recently and we talked about what was happening with their client for instance, where some of them are managing the costs by reducing the size of the house but they still want the same features in the house," Kelly said. 

"So things like kitchens and bathrooms, which are expensive parts of the home, they still want so the per square metre rate has gone up quite a bit.

"The overall cost is quite difficult because people are adjusting their expectations but I would say it's north of that 6.1 percent, I would say it's closer to 10 percent.  

With Omicron tipped by many experts to cause COVID-19 case numbers to spike, this could see issues with the supply chain as many people could be forced into self-isolation by the Government’s tight close contact rules. 

Kelly said the key for the construction industry was making sure large parts of the industry was deemed critical workers. 

This would see workers being able to 'test to return' to work with rapid antigen tests instead of doing seven or 10 days in self-isolation if they tested positive or were a close contact. 

Prime Minister Jacinda Ardern told AM on Tuesday that the Government will announce who is deemed a critical worker this week.  

"I think there is quite a lot of work going on and I know individual businesses large and small are thinking about what would I do in that situation," Kelly told AM.  

"When I think about the whole thing, I think about what we can control and what we can not control, whether that's products or people. 

"We can't control the international supply chain. We are a small market a long way from the big world markets but what we can do is control what happens locally. The Government with the Omicron settings has talked about critical workers. We have yet to hear what that means for construction but I think that it's really important that some parts of the building industry - maybe not every job - are considered as critical."

Kelly said for anyone considering building, now is the time to plan because otherwise they will get left behind. 

"The prices go up and they often don't come down so if people are waiting for it to be cheaper some time in the future, that's unlikely to happen," he said. 

"What I would say is this is your time to plan so start talking to… whether it be your architect, designer and your builder and understand what is going on and the timeframes. 

"It is unnerving the price increases and the delays and if you talk to professionals, they can explain the process. 

"So break it down into manageable chunks and talk about the overall estimate of costs and then think ok what can I afford, what size do I want, where do I want the build. So do the planning and don't wait as there is still a lot of demand for housing in New Zealand and if you leave it you'll find other people in the queue."