This article is from the Australian Property Journal archive
CONSTRUCTION costs have reached a new high after recording the greatest annual increase on record, outside of the period following the introduction of the GST.
CoreLogic’s Cordell Construction Cost Index (CCCI) was up 11.9% over the 2022 calendar year, compared to the 7.3% rise in the previous 12 months.
“The industry has been through a very challenging 18 months to two years, with extreme periods of volatility in pricing due to restricted domestic supply chains, material and labour shortages,” said John Bennett, construction cost estimation manager at CoreLogic.
The quarterly growth rate is however significantly down, with the December quarterly rate at 1.9% compared to September’s 4.7%.
“Although the annual CCCI remains high, on a quarterly basis there’s been an easing in residential construction costs. This reflects a pull back from consumers, builders and will eventually flow through to suppliers, as projects are delayed or put on hold in the current economic environment,” added Bennett.
Bennet noted it was the lowest quarterly increase in the index since December 2021, though the quarterly rate of growth remained higher than the five-year average of 1.4%.
“The biggest contributors currently are volatile timber prices, with fluctuations in structural timber costs and general increases to timber products. Prices for metal products such as gutters, lintels and fixings, used for roofing and structural purposes continue to increase, and concrete values also remain unstable,” said Bennett.
“Petrol rises are affecting cartage and delivery costs, notably concrete, however larger items such as rainwater tanks are also affected. Gravel, aggregates and fill have increased, possibly affected by the rise in petrol prices, while increasing costs for appliances and fittings have also been noticed.”
South Australia and New South Wales recorded changes in the lower range at 1.7% and 1.8% respectively, while on the other end both Western Australia and Queensland saw 2.0% increases.
According to Tim Lawless, research director at CoreLogic, dwelling approval figures had dropped by 41% since peaking in March 2021, which should alleviate some pressure on the construction industry, despite the still significant pipeline.
“Although a large number of homes remain under construction, the dwindling number of approved homes in the construction pipeline should help to alleviate construction costs down the track,” added Lawless.
“Anecdotally, as skilled migration continues to ramp up, we should see the costs associated with some trades and labour slow further.”
Lawless also noted the housing component of the Consumer Price Index has been one of the main factors contributing to high rates of inflation in recent years.
“A reduction in growth associated with the cost of building a new home should gradually flow through to less inflationary pressures from the housing sector through the year,” concluded Lawless.
