This article is from the Australian Property Journal archive
CONSTRUCTION prices are starting to rise after declining in the past 12 months.
According to Davis Langdon, rising activity in the housing sector and the impact of the BER stimulus package on the non-residential construction sector are driving up prices after declining in most markets and sectors through 2009.
Davis Langdon senior economist Dr Andrew Wilson predicts the prices will continue to rise throughout 2011.
Dr Wilson said according to the ABS Producer Price Indices, Australian weighted building construction costs rose by 0.65% in the March quarter of 2010, the strongest rise since 2008.
“All sectors contributed to this outcome with the cost of housing rising by 0.83% and non-residential construction costs rising by 0.46%.
“The rise in non-residential construction costs was the first significant price rise in the sector since September 2008, prior to the impact on the market of rising interest rates and the GFC,” he continued.
New South Wales led the way with a rise of 0.94% in building costs for the quarter and Western Australia recorded the strongest rise with a quarterly increase of 1.35%. However, non-residential construction costs continue to decline reflecting the continued hangover from the high levels of activity of the previous commercial building boom.
Dr Wilson said a rebound in apartment construction activity in NSW and Victoria also appears to have contributed to price increases in the residential sector.
“As the impact wanes on the construction industry of the BER stimulus package and other government spending measures, and with continued weakness in the commercial property sector, builders will face higher levels of competition in tender markets as they struggle to replace diminishing workloads.
“Increased tender completion and the impact of higher interest rates on housing demand, will act as a break on emerging building cost pressures through 2010,” he added.
Dr Wilson said an expected acceleration in general economic activity, particularly in WA and QLD as a consequence of the emerging international resources boom, and to a lesser degree Victoria through its rapid population growth, should see building price pressures re-emerge and accelerate through 2011.
Australian Property Journal
