Australia’s residential construction costs increased 9% over the 12 months to March – the highest annual growth rate on record since the introduction of the GST (10.2% over the year to March 2001), according to CoreLogic’s Cordell Construction Cost Index for Q1 2022.
The CCCI quarterly growth rate climbed in Q1 2022 to 2.4% – more than double the 1.1% growth rate in Q4 2021 but below the 3.8% surge over the three months to September 2021.
John Bennett, CoreLogic construction cost estimation manager, said the Cordell data showed that much of the growth was driven by timber, metals, and imported products.
“Timber costs continue to rise, with cladding, decking, and other timber items affected,” Bennett said. “Steep rises in metal prices are also now flowing through to the market, with structural steel, fixings, and metal components hit hard. We continued to see volatility in the rest of the market, with imported products 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.”
Tim Lawless, CoreLogic research director, said the annual change in construction costs is approaching double digits – and its impact 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,” Lawless said. “While the most obvious impact from high residential building costs are with builders, new home buyers and renovators, another important consideration is the sum insured by homeowners. With construction costs up more than 25% over the past five years, it’s important for homeowners to reassess their insurance terms and make sure they are adequately covered should they need to make a claim.”
Queensland recorded the lowest quarterly increase in construction costs over Q1 at 2.2%, while South Australia saw the highest quarterly growth at 2.5%. New South Wales, Victoria, and Western Australia each rose 2.4%, in line with the national growth rate.
“Considering the record number of houses approved for construction during the HomeBuilder grant along with additional rebuild and repair work from the recent floods, demand for construction materials is likely to remain high,” Lawless said. “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.”