Australians who started the construction or renovation of their homes over the past month faced construction costs that were significantly higher than a year ago.
CoreLogic’s latest Cordell Construction Cost Index (CCCI) showed a 9% reading over the year to March 2022, the highest annual gain in construction costs since the introduction of goods and services tax (GST) in 2001.
CoreLogic construction cost estimation manager John Bennett said timber, metals, and imported products are driving much of the growth in construction costs.
“Timber costs continue to rise, with cladding, decking and other timber items affected. Steep rises in metal prices are also now flowing through to the market, with structural steel, fixings and metal components hit hard,” he said.
Mr Bennett said imported construction products are the most vulnerable due to elevated shipping costs.
“Rising fuel costs are also on the radar and we have continued to see further increases in the cost of other materials,” he said.
On a quarterly basis, construction costs went up by 2.4%, building on the 1.1% gain over the preceding quarter and the 3.8% surge over the September 2021 quarter.
Builders and renovators in South Australia experienced the highest quarterly growth in construction costs over the quarter at 2.5%.
New South Wales, Victoria and Western Australia all saw a 2.4% increase in construction costs over the three months to March, in line with the national growth rate.
Queensland, on the other hand, posted the lowest gain at 2.2%.
CoreLogic research director Tim Lawless said with the annual growth of construction costs approaching double-digits, the impact of rising construction costs would continue to be multi-layered.
“Construction cost growth adds a further element of uncertainty to new building projects and renovations as well as inflationary pressures to the economy,” he said.
Mr Lawless said while the most obvious impact of these surging construction costs would be on builders, new home buyers, and builders, it is also important to consider the insurance of homeowners.
“With construction costs up more than 25% over the past five years, it is important for homeowners to reassess their insurance terms and make sure they are adequately covered should they need to make a claim,” he said.
The recent approval data from the Australian Bureau of Statistics (ABS) showed a 43.5% surge in February 2022, with both houses and units reporting strong gains.
Mr Lawless said the record number of houses approved for construction during the HomeBuilder grant along with additional rebuild and repair work from the recent floods would likely help keep demand for construction materials high.
“At the same time, supply side challenges persist — a shortage of key materials such as structural timbers and metal products along with higher fuel costs, and labour shortages, is likely to keep upwards pressure on building costs for some time yet,” he said.
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