Construction costs making it 'impossible' to build affordable homes - developer

Property developers are sounding a warning that the Government's plan to enable more affordable housing to be built is being undermined by skyrocketing construction costs.

Property developers are warning that rising construction costs will undermine the Government’s affordable housing plan. Source: 1 NEWS

They say the cost of building a house is up almost 50% in just two years and combined with rising land prices they say this makes building an affordable house almost impossible.

"Last year these houses were $1420 a square metre, unfortunately our builder has gone into receivership so we're contracting to get the same house built over here at about $1800 a metre, so that's a 27% increase in a year on construction costs," says Property Developer Kerry Knight.

However, Mr Knight's figures don't quite square with official figures which show excluding the land, new house prices were up about 5% nationwide and 7% in Auckland last year.

But Mr Knight is not alone with another developer telling ONE News he's been given quotes that are up 50% on two years ago.

Mr Knight says he's not making an extra cent and the increase is due to a shortage of builders and subcontractors.

"What do you think this does to the drive to make more affordable housing?

"Well in Auckland it makes it impossible, unless you want houses without kitchens and bathrooms."

Housing Minister Nick Smith insists he's keeping a close eye on building costs.

"The underlying part though is that it's the cost of land rather than the building materials that's having the biggest and most negative impact on housing affordability," he says.

The Master Builders Federation is rubbishing talk of such big price hikes.

"There's still plenty of competition in the market, our members are happy with the upturn but their margins are no greater than they were," says NZ Master Builders Federation CEO David Kelly.

"There may be a little bit of catch up but there's certainly no profiteering that we know of."

Experts are saying the labour shortage will exist for several years yet meaning the price tag on houses could continue to rise.