Australian cities have seen the largest annual jumps in construction costs globally, according to new research by Compare the Market.
Among 46 cities examined worldwide, four Australian cities topped the rankings for the biggest increase in the Tender Price Index (TPI), which tracks average construction cost movements.
“The top three cities are all in the state of Queensland and have been recently affected by extreme weather,” said Adrian Taylor (pictured), executive general manager of general insurance at Compare the Market.
The Gold Coast recorded the biggest TPI increase at 7.4%, followed by Brisbane (7.1%), Townsville (6.9%), and Adelaide (6.4%), which tied with Toronto in Canada.
These cost pressures come on top of worsening affordability across Australian capitals. According to the latest Demographia International Housing Affordability report, Sydney ranks as the second least affordable housing market globally, behind only Hong Kong. Adelaide, Melbourne and Brisbane also made the top 10, with Brisbane’s affordability rating now comparable to larger cities like Sydney and Melbourne.
Taylor linked Queensland’s cost surges to a string of weather disasters that have impacted local construction industries.
“It’s not too surprising seeing Queensland cities having the biggest increases to overall construction costs,” Taylor said.
“Townsville has been hit with multiple flood events and storm events in the past year alone. This is no doubt going to exacerbate an industry that has already seen increasing prices in recent years.
“Not to mention, ex Tropical Cyclone Alfred hit South-east Queensland and a number of cities, including Brisbane and the Gold Coast. These storm events are just another influence on the pile of factors that are adding to construction costs.”
While Australia led in construction cost increases, US cities dominated in absolute construction costs.
New York topped the global list at $5,944.00 per square metre for residential builds. In comparison, Townsville was the most expensive in Australia, at $3,066.67 per square metre.
The Compare the Market report underscored the growing global cost pressures on both materials and labour, but particularly how localised factors like natural disasters can amplify cost hikes in specific regions.
With the cost of rebuilding rising sharply, Taylor warned that many Australians could face financial shortfalls if they need to make a claim.
“Should you lose your home from an insured event and need to rebuild, your insurer covers the cost of replacing your home buildings and contents up to the amount stated in the policy,” he said. “If this isn’t sufficient to cover building costs, you’ll be left out-of-pocket for the remainder.
“Some insurers will increase your sum insured by a small amount every year to help accommodate for changes in the construction industry, but it may not be enough, and you could face being left with the rest of the bill if you are underinsured.”
Taylor’s comments highlight the need for brokers to help clients stay on top of rising rebuild costs.
“Make sure to read the product disclosure statement (PDS) and target market determination (TMD) for detailed information on coverage, exclusions and terms related to insuring your home and covering rebuilding expenses,” he said.
