Modelling Residential Building Costs in New Zealand: A Time-Series Transfer Function Approach

Linlin Zhao*, Jasper Mbachu, Zhansheng Liu

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

3 Citations (Scopus)
148 Downloads (Pure)


Cost estimating based on a building cost index plays an important role in project planning and cost management by providing accurate cost information. However, an effective method to predict the building cost index of New Zealand is lacking. This study proposes a transfer function method to improve the forecasting accuracy of the building cost index. In this study, the New Zealand house price index is included in the transfer function models as an explanatory variable to produce cost forecasts. The proposed method is used to estimate the building cost index of residential buildings including one-story houses, two-story houses, and town houses in New Zealand. To demonstrate the effectiveness of the proposed method, this study compares the cost forecasts generated from the transfer function models and the autoregressive integrated moving average (ARIMA) models. The results indicate that the proposed transfer function method can achieve better outcomes than ARIMA models by considering the time-lag causality between building costs and New Zealand house prices. The proposed method can be used by industry professionals as a practical tool to predict project costs and help the professionals to better capture the inherent relationships between cost and house prices.

Original languageEnglish
Article number7028049
Number of pages18
JournalMathematical Problems in Engineering
Publication statusPublished - 27 Jan 2020


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