Thinking of building a new home in Auckland? The city’s freshly released 2024 property valuations provide valuable insight into where opportunities and challenges lie for new builds. Auckland Council’s latest rating valuation update shows notable shifts in land values across the region. Overall, residential property values have dropped about 9% since 2021, with land values - in particular - seeing a significant decline (around –13% on average for residential land). For prospective home builders, lower land valuations can reduce upfront costs or create buying opportunities in certain suburbs. However, the equation isn’t all positive – one must also consider construction costs (which, although stabilising, remain high) and the financing environment under the current Official Cash Rate. This article breaks down how the new valuations might influence your decision to build a new home.
Land Value Shifts
New council valuations indicate that land values have generally fallen, which changes the game for anyone looking to buy a section or rebuild. In many cases, the drop in a property’s value since 2021 was driven largely by land: Auckland Council notes residential land is down about 13% on average. This reflects a cooldown in development activity and, in some places, has signalled potential zoning changes. For a new home builder, this trend has a silver lining. Cheaper land (relative to a few years ago) can lower the total cost of your project. If you’ve been eyeing a plot of land or a good site where you’d like to replace the existing home, then you might find the price more attainable now than during the 2021 peak.
That said, land value shifts are not uniform across the region. Properties in central Auckland suburbs saw some of the steepest declines – local board areas closer to the city centre experienced above-average drops of 11–14%. These inner-city and mid-ring suburbs (for example, parts of Albert-Eden, Puketāpapa, or Maungakiekie-Tāmaki) were previously very high in both price and demand, so their adjustment has been sharper. By contrast, some outer areas held their values much better: in northern and rural-fringe locales like Hibiscus Coast, Upper Harbour, or Franklin, values only dipped modestly (about 1–4%). For builders, this means relative bargains may lie in the areas that dropped the most. A suburb like Henderson or Glen Innes – which the council identified among those with larger valuation declines due to reduced redevelopment demand – could present an opportunity if you’re willing to invest there.
You might secure land at a discount compared to a couple of years ago, then add value by building new. Just be sure to research why an area’s values fell: for example, if it’s due to temporary factors (like a lull in development or flood zone stigma) that could change in future, the area might truly be undervalued. If it’s due to longer-term issues (e.g. distance from jobs or ongoing oversupply), tread carefully.
The Cost of a New Build
A crucial consideration for anyone building a home is the cost-to-value ratio – essentially, will the finished house be worth at least what you spend to build it (and ideally more)? The new valuations offer some guidance on expected values. With Auckland’s average residential values down ~9%, the market has cooled since 2021. This means you can’t automatically count on selling or valuing your new build at 2021-era peak prices. However, building during a market dip can work to your advantage if done prudently. Construction costs, which had surged in 2021–2022, have finally stabilised and even eased. Industry data shows that by mid-2024, the cost to construct a standard home actually dropped slightly (–1.1% in the June quarter) – the first decrease in over a decade. This reversal is attributed to improved supply of materials and a slowdown in building activity, which has reduced pressure on builders and suppliers.
In short, you’re less likely to face runaway building costs now than during the construction boom. Key materials like structural steel, joinery, and fixtures have seen prices come down from their highs. For an aspiring home builder, the combination of lower land prices and plateauing build costs is encouraging. It improves the chance that your project’s total cost (land + construction) will align with the end value of the property. To make sure, it’s wise to do a thorough feasibility check.
You can work with Modal Architecture to produce a scheme plan to ensure the numbers stack up. Modal Architecture can create your design - ready to be quoted. For a small investment, you can use these scheme plans to get quotes from builders and compare the all-in cost to the approximate value of similar new homes selling in that area. This allows for a thorough feasibility assessment to ensure that you would not be over-capitalising. Also, remember to plan for contingencies – even though cost inflation has slowed, unexpected expenses can still occur, so leave a buffer in your budget.
Financing a New Build
Financing a construction project differs from a standard home purchase loan. The good news is that banks and regulators have policies to support new builds. In fact, these policies encourage housing supply - the Reserve Bank exempts new construction loans from certain lending restrictions. For example, mortgages for building a new home are generally exempt from loan-to-value (LVR) limits. This means you might not need the full 20% deposit that an existing house purchase would require – some banks allow as little as 10% down for a new build. Similarly, the newly introduced DTI (debt-to-income) restrictions do not heavily penalise loans for new builds; banks have leeway for borrowers embarking on a new build. These flexibilities recognise that new housing is beneficial and often requires large upfront investment. Even with these advantages, you’ll still need to convince the bank that you can service the loan, and that the project is sound.
With the OCR now at 3.25% (down from its peak), interest rates for mortgages have been trending down. Major banks have recently cut fixed home loan rates below 5% in anticipation of further easing. If you’re financing a build, you’ll typically start on a floating or interest-only loan during construction, then roll into a standard mortgage upon completion. Today’s floating rates are around 6–7% (they move with the OCR), but as the central bank has begun to lower the OCR, there’s hope for further relief. Forecasts suggest the OCR could ease gradually further by late 2025, which may bring floating rates down.
For now, plan your finances on current rates (with a healthy buffer) – ensure you can handle the interest costs on the drawn-down loan as the build progresses. One strategy is to quickly refix portions of the loan as stages finish, taking advantage of those ~5% fixed deals. Mortgage brokers and banks will be able to advise you of your best options here. Lastly, remember to account for timing. Once you’re ready to build, a typical build takes between 6 to 12 months (and more for complex projects). Over that time, interest rate conditions might change. It’s wise to leave some breathing room in your budget for interest fluctuations or delays. On a brighter note, by the time your new home is ready to live in, you might be able to refinance at a lower rate if the OCR reductions continue and banks begin to compete for borrowers’ business. Keep communication open with your lender – many offer construction loans in stages, and you only pay interest on funds as you use them.
Opportunities
The latest valuations have effectively “reset” property values, revealing which Auckland suburbs may now be undervalued from a long-term perspective. For those planning to build new, picking the right location is as important as managing the build itself. Two broad strategies emerge:
- Build in a discounted area: Areas that saw larger valuation drops might offer more upside in the future. For example, parts of South and West Auckland that were earmarked for intensive housing development experienced big value corrections (e.g. Panmure, Māngere, and Massey). These places have good infrastructure and were booming before the downturn; their lower current values could be a chance to buy land cheaply. If you build a quality new home in one of these suburbs while prices are down, you could benefit if demand in the area rebounds. Essentially, you’re getting in on the ground floor price-wise. Just ensure the suburb has the amenities and improvement projects that will attract future buyers or tenants (such as transport links, town centre upgrades, etc.).
- Build in a resilient area: On the other hand, the suburbs that held their values or only dipped slightly have demonstrated resilience and ongoing demand. For instance, family-friendly outer areas like the Hibiscus Coast or parts of Franklin (Pukekohe, Beachlands) barely fell in value. Building in these locations means you’re investing in a stable market – your new home’s value is less likely to surprise you on the downside. You might not get a “bargain” on land, but you have more certainty that there’s sustained interest from buyers who want to live there. Also, some central suburbs that dropped a lot might actually still be quite expensive (they fell from a high base). Weigh the absolute cost too – a 10% drop in a suburb where the average was $1.5m is still a hefty price. In contrast, an “undervalued” fringe suburb might have new land packages that are far more affordable overall.
In either case, doing local homework is key. Check the 2024 valuation trends by local board (Auckland Council has published summaries by area) to see how different parts of the city fared. If a suburb’s values fell much more than the regional average, dig into why – was it a correction from previously overheated prices, or something fundamentally impacting the area? Sometimes undervalued suburbs fly under the radar until a catalyst (like a new train line or shopping centre) unlocks their potential. As a new-build homeowner, you could ride that wave. On the flip side, ensure the lower valuation isn’t due to issues that a new build won’t solve (for example, being in a high-risk flood zone or very remote locale).
Bottom line: Auckland’s new property valuations have levelled the field in many ways. They’ve brought overpriced pockets back to reality and highlighted areas where value for money has improved. If you’re planning to build a new home, leverage this information to make savvy decisions, from picking a cost-effective suburb to negotiating land prices. Combined with the current easing in building costs and supportive lending rules for new construction, 2025 could be a smart window to create your dream home or investment. Just proceed with due diligence: budget conservatively, consult experts when needed, and always keep an eye on the market conditions. Building a house is a big endeavour, but with the latest valuation data in hand, you’re better equipped to ensure your new build is both a lovely home and a sound investment for the future.
To assess your financial options, Modal Architecture can provide a design, ready for pricing to ensure you have all the information before purchasing land for a future new build.
References
Modal Architecture relied on some great sources to ensure this blog post was evidence-based. Specifically, we relied on articles and reference material from the following sources: 1 News, Auckland Council, Core Logic, MoneyHub, NZ Advisor, RBNZ, RentHouse.nz, and RNZ.
