Is it Cheaper to Buy or Build A House in NZ

Is it cheaper to buy or build a house in NZ? Canstar crunches the numbers to discover whether it’s better to build a new home or buy an existing one.

To buy or to build – it’s a simple question, for sure. But, unfortunately, the answer is a little more complicated. So Canstar decided to delve a little deeper into the question and crunch the numbers to discover whether it’s cheaper to buy an existing home in New Zealand or to build a new one.

Cheaper to buy or build: It’s all about the land!

In its most recent Financial Stability Report, the Reserve Bank highlighted the increasing cost of building land. It noted that:

“Another important factor for housing market dynamics is the price and availability of developable land. The value of the land now accounts for around 60% of New Zealand’s median house price, compared to around 40% five years ago.”

So as a starting point for our Build vs Buy number crunching, we decided to break down the median house prices around the country into two components:

  1. Cost of Land (60%)
  2. Cost of Home (40%)

Cheaper to buy or build: Cost of an existing home

Over the past year, the NZ property market has run crazy hot. Auckland remains in top spot for median prices, but plenty of other regions are on its tail. And there have been some huge year-on-year increases. According to REINZ’s February 2022 Property Report, median house prices across NZ increased annually by 20.5%, from $730,300 in January 2020 to $880,000 in January 2021. Although prices in January did cool a little, compared to December’s figures.

Around the country, if you break down the median house price into its two components, it looks like this:

Region Median Price Cost of Land 60% Cost of House 40%
Auckland $1,200,000 $720,000 $480,000
Bay of Plenty $942,000 $565,200 $376,800
Tasman $915,000 $549,000 $366,000
Wellington $911,000 $546,600 $364,400
Waikato $830,000 $498,000 $332,000
Northland $810,000 $486,000 $324,000
Hawke’s Bay $785,000 $471,000 $314,000
Nelson $765,000 $459,000 $306,000
Otago $735,000 $441,000 $294,000
Marlborough $700,600 $420,360 $280,240
Gisborne $650,000 $390,000 $260,000
Canterbury $650,000 $390,000 $260,000
Taranaki $630,000 $378,000 $252,000
Manawatu-Whanganui $600,000 $360,000 $240,000
Southland $430,000 $258,000 $172,000
West Coast $345,000 $207,000 $138,000

Source: REINZ

Cheaper to buy or build: Cost of a new build in NZ

Now we have an approximation of the rough cost of median-size building plots around the country, it’s time to factor in building costs.

On our website, the story How Much to Build a New House in NZ is one of the most popular reads. And, recently, we updated it to look at the rising costs of building materials. Delving deeper into those rising costs, we also published the article: Rising Building Costs of a House in NZ: Up 10%+.

In the story, we look at the recent Cordell Construction report into residential building costs, which claims the cost to build a standard 200mbrick-and-tile house went up by 6.1% in 2021.

It’s a figure that’s in line with the inflation rate. During 2021, the consumers price index increased 5.9% from the December 2020 quarter to the December 2021 quarter. However, industry experts reveal that this is a conservative figure, and that the actual increases in building costs are much higher, around 10%.

When a 10% increase is factored into the costs of building new homes (based on 2021 building consent applications and excluding fees), the updated costs of building, when combined with the cost of land in each region, looks like this:

Region Land Cost Cost of New Build New Build + Land
Auckland $720,000 $428,176 $1,148,176
Bay of Plenty $565,200 $452,647 $1,017,847
Tasman $549,000 $478,673 $1,027,673
Wellington $546,600 $442,398 $988,998
Waikato $498,000 $464,993 $962,993
Northland $486,000 $517,794 $1,003,794
Hawke’s Bay $471,000 $433,648 $904,648
Nelson $459,000 $463,259 $922,259
Otago $441,000 $531,203 $972,203
Marlborough $420,360 $502,382 $922,742
Gisborne $390,000 $323,094 $713,094
Canterbury $390,000 $394,030 $784,030
Taranaki $378,000 $414,919 $792,919
Manawatu-Whanganui $360,000 $455,360 $815,360
Southland $258,000 $468,718 $726,718
West Coast $207,000 $383,292 $590,292

Cheaper to buy or build: Old vs New

As you can see from these figures, when the price of land is factored into the cost of a new build, they work out more expensive (on average 25% more expensive) than existing homes. Only in Auckland are they cheaper, but then not by much.

Region Median House Price Cost of New Build + Land % More
Auckland $1,200,000 $1,148,176 -4.3%
Bay of Plenty $942,000 $1,017,847 8.1%
Tasman $915,000 $1,027,673 12.3%
Wellington $911,000 $988,998 8.6%
Waikato $830,000 $962,993 16%
Northland $810,000 $1,003,794 23.9%
Hawke’s Bay $785,000 $904,648 15.2%
Nelson $765,000 $922,259 20.6%
Otago $735,000 $972,203 32.3%
Marlborough $700,600 $922,742 31%
Gisborne $650,000 $713,094 9.7%
Canterbury $650,000 $784,030 20.6%
Taranaki $630,000 $792,919 25.9%
Manawatu-Whanganui $600,000 $815,360 35.9%
Southland $430,000 $726,718 69%
West Coast $345,000 $590,292 71.1%

Cheaper to buy or build: New is expensive!

So new builds are no cheaper than existing homes. It’s not surprising really. New things are generally more expensive than second-hand items. And even a basic new build is going to be worth a lot more than an unrenovated older home.

With average building costs now creeping towards $3500 per m2, a 155m2 Kiwi home (the average size built last year) is going to cost close to $550,000 to build. Then you need to add the cost of the land, which has become prohibitively expensive in many urban centres.

But there are things you can do to keep building costs down:

  • Buy land in cheaper new greenfield developments, outside of more expensive inner-city suburbs
  • Build a smaller home
  • Avoid elevated sites, exposed to the wind
  • If possible buy a flat level site, avoid steep (or even not so steep) sites that require retaining walls
  • Avoid unsuitable ground requiring engineering design, or places with difficult site access
  • Don’t use large square metres of glass (requiring steel portals)
  • Have smaller rooms, not open, expansive living areas that requiring engineering due to the lack of walls to brace
  • Avoid cantilevered decks, roofs and floors
  • Don’t use expensive cladding, like cedar, or roofing, such as tray roofing
  • Say no to any build methods that are time consuming

Related article: Lowest Construction Loan Interest Rate Deals

Cheaper to buy or build: The best construction loans

Ultimately, one of the easiest ways to reduce the cost of building or buying a home is to ensure that you secure the lowest mortgage rate. And this is something Canstar can help you with, thanks to our free and easy-to-use comparison tools.

If you’re currently considering a home loan, the table below displays some of the 2-year fixed-rate home loans on our database (some may have links to lenders’ websites) that are available for home owners looking to refinance. This table is sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Products shown are principal and interest home loans available for a loan amount of $500K in Auckland. Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products. Canstar may earn a fee for referrals.


About the author of this page

Bruce PitchersThis report was written by Canstar’s Editor, Bruce Pitchers. Bruce began his career writing about pop culture, and spent a decade in sports journalism. More recently, he’s applied his editing and writing skills to the world of finance and property. Prior to Canstar, he worked as a freelancer, including for The Australian Financial Review, the NZ Financial Markets Authority, and for real estate companies on both sides of the Tasman.


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