Despite an easing in the quarterly growth rate, national construction costs increased 7.3% over the 2021 calendar year – the highest annual growth rate since March 2005, according to the latest figures from CoreLogic.
CoreLogic’s Cordell Construction Cost Index (CCCI) found a softening in quarterly construction cost growth in Q4 to 1.1%, from the 3.8% surge in national residential construction costs over the three months to September 2021. The change brings the quarterly trend back in line with the five-year average and below the Consumer Price Index of 1.3% for the same period.
Tim Lawless, CoreLogic research director, said the smaller rise over the quarter might reflect some rebalancing in the index after Q3’s jump. The data company expects growth in residential construction costs, however, to remain above average over the coming quarter as supply-chain disruptions persist.
“There is a significant amount of residential construction work in the pipeline that has been approved but not yet completed,” Lawless said. “With some materials such as timber and metal products reportedly remaining in short supply, there is the possibility some residential projects will be delayed or run over budget.”
Timber (mostly structural timber) continues to be the primary driver of cost increases, while other segments of the market remain volatile, with increasing pressure on metal costs, the Cordell data showed.
“With such a large rise in construction costs over the year, we could see this translating into more expensive new homes and bigger renovation costs, ultimately placing additional upwards pressure on inflation,” Lawless said.