Identification of costs drivers and their influence levels on building development costs plays a key role in the development of construction models and improve the efficiency and effectiveness of any project. Forty-five indicators influencing building development costs in New Zealand were explored by literature review and pilot interviews. These indicators were grouped into seven categories. The determination and ranking of the significant cost drivers were carried out through questionnaire survey distributed to key professionals working in New Zealand construction industry. Structural equation modeling (SEM) was used in analysing the empirical data. Findings showed that the property market, construction industry characteristics, statutory and regulatory, and socio-economic factors were major drivers of the building development cost trends in New Zealand. It was recommended that the ever-increasing building development costs and housing unaffordability in New Zealand could be significantly mitigated by addressing the identified factors.