The Australian construction sector is seeing cost stabilisation after pandemic-driven upheaval, according to CoreLogic.
CoreLogic’s latest Cordell Construction Cost Index (CCCI) for Q1 2024 revealed a gradual stabilisation in the cost to build a typical new dwelling, alongside a stark decrease in detached dwelling approvals.
The first quarter of 2024 has shown a continuation in the stabilisation of national construction costs, with the CCCI recording a modest 0.8% rise. This follows a similar increase seen in the December quarter of last year, marking a steady trend towards normalisation.
The annual change in the CCCI has eased to 2.8%, noted as the smallest annual rise since March 2007 and significantly below the pre-COVID decade average of 4.0%.
“The strong fluctuations seen in building material costs over the past few years have leveled out and are now within normal margins,” said Kaytlin Ezzy (pictured above), CoreLogic economist.
“No clear trend was seen in timber or metal materials, with price changes normalising. Current building costs are still 27.6% higher than at the start of the pandemic, which is likely putting significant pressure on builder's profit margins.”
Looking ahead, the CCCI anticipates costs to continue within usual margins, driven by subdued national dwelling approvals.
“National dwelling approvals have held well below average in 2023 and are continuing to do so into 2024, helping to dampen the growth in construction costs,” Ezzy said.
Despite a decrease in monthly detached dwelling approvals to the lowest count since June 2012, a substantial pipeline of around 255,000 dwellings approved but not yet completed is expected to keep builders active throughout 2024.
The Q1 2024 CCCI report highlighted how construction costs varied across states, with Queensland and South Australia experiencing a slight acceleration in growth, both up 0.7% in the three months to March.
In contrast, New South Wales and Victoria saw a pullback, both up 0.9%, and Western Australia’s growth remained steady, at 0.7%.
Queensland reported the lowest annual change in construction costs in almost 14 years, recording a 0.7% lift in construction costs over the March quarter; while Western Australia, up 0.7%, saw the lowest annual change in nearly seven years, CoreLogic reported.
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