Fuel-hungry trades feel the pinch as construction costs climb after two calmer months
Construction costs across New Zealand have ticked higher again, after diesel prices rebounded in August following a sharp fall the month before.
Costs climb after a quiet patch
The latest figures from QV CostBuilder show the average building cost per square metre for residential builds rose 1.1% over the quarter, pushing annual residential construction cost growth to 3.3%. The increase breaks two months of relative calm, with fuel costs again flowing through to trades that rely heavily on machinery and transport.
QV CostBuilder quantity surveyor Martin Bisset said the swing in diesel prices was behind the shift.
"Fuel remains one of the most volatile inputs in construction," Bisset said in a media release. "Lower diesel prices helped keep construction costs broadly stable in June and July. Diesel bounced back in August, and construction costs have moved higher as a result."
MBIE's weekly fuel price monitoring bears this out: diesel prices climbed from around 243 cents a litre in mid-July to almost 272 cents through August — a rise of roughly 27 cents a litre in three weeks.
Excavation and demolition hit hardest
The impact was sharpest in fuel-intensive trades. Excavation costs jumped 4.3% in August on the back of higher diesel rates, while demolition costs rose 3.7%, reflecting both fuel and imported fill material price rises.
"Excavation and demolition are particularly exposed to fuel movements, so when diesel jumps, those trades tend to feel it quickly," Bisset said.
Other trades also nudged higher, with roof coverings up 1.7%, joinery up 1.4% and glazing up 0.9%, contributing to an average 0.5% rise in trade rates for the month. Non-residential building costs, excluding education buildings, rose 0.5% for the quarter and 2% annually.
Still measured growth, but budgets need buffer
Despite the uptick, Bisset was careful to frame the movement as measured rather than alarming.
"The broader picture is still one of modest growth," he said. "Construction cost inflation is not running away, but neither has it disappeared. Anyone budgeting for a build still needs to allow for movement, particularly in fuel-sensitive parts of the job."
That caution matters more given the wider pipeline is refilling: 40,581 new dwellings were consented in the year to June 2026 — the first time above 40,000 since 2023, up 19% — though June's monthly figures slipped 4%, and rising mortgage rates could squeeze borrowing capacity for buyers absorbing the new supply.
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