Home building costs rising at record rate
Residential construction costs have recorded their fastest rate of growth over both a quarter and year, according to CoreLogic’s Cordell Construction Cost Index.
The cost to build a 200sqm three-bedroom, two-bathroom, single-storey brick-and-tile house in the June quarter was 2.6% higher than the quarter before and 7.7% higher than the year before.
That's the biggest increase since the index started in 2012.
CoreLogic's construction cost estimation manager, John Bennett, said rising metal prices were leading to increasing prices for reinforcing, fixings, fittings, fencing, garage doors and aluminium windows.
At the same time, higher timber costs were having knock-on effects on the cost of related products, such as landscaping supplies and kitchen cabinetry, Mr Bennett said.
“It is important to note that other pressures are at play on the industry, with labour availability and overheads impacting costs. Labour availability can also affect build times, and can leave builders more exposed to market changes and holding costs," he said.
Construction costs forecast to keep rising
Mr Davidson said there were a lot of building projects in the pipeline waiting to start, which was putting further pressure on prices.
"Looking ahead, it wouldn’t be a surprise if cost pressures get worse in the next quarter or two, potentially pushing up towards double-digit indexed growth, before they start to slow later as builders’ workloads potentially ease off in 2023."
That said, Mr Davidson doesn't expect the residential construction industry to move from boom to bust.
"After all, the loan-to-value ratio rules and tax system now favour new-build property, both for owner-occupiers and investors. A higher ‘normal’ level of demand for new property than we’ve seen in the past should give developers confidence about future market conditions," he said.
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