The cost of building homes rose by 3.4% over the past year, marking the largest annual increase since a 4% jump in the year leading up to September 2023, Property Council reported.
This surge brought construction costs to 30.8% higher than they were at the start of the COVID pandemic, according to the latest data from CoreLogic's Cordell Construction Cost Index (CCCI).
CoreLogic Economist Kaytlin Ezzy (pictured above) pointed out that the increase in homebuilding expenses in the latter half of 2024 was largely driven by escalating costs in labour, as well as hikes in prices for electrical and plumbing fixtures, landscaping products, kitchen joinery, and specialised timber.
“Labour will likely continue to be a driving factor pushing construction costs up, with the annual pace of construction costs expected to continue rising towards the pre-COVID decade average of 4.0% in 2025,” Ezzy said.
The construction industry faces ongoing challenges from labour shortages, a factor that John Bennett, CoreLogic construction cost estimation manager, sees as continuing to heavily influence building costs.
“There are not enough tradespeople to facilitate the required or desired workloads,” Bennett said, noting that the time required to train new workers means this issue won’t be resolved quickly.
While labour costs are expected to keep driving up overall construction costs, the prices of building materials showed mixed trends. Bennett highlighted that while the cost of concrete blocks fell by 15% in the last quarter of 2024, prices for plumbing PEX fittings and pipework rose by 5%.
Looking ahead to 2025, he anticipates more stability in material costs, with many products expected to maintain their current prices.
As the construction industry grapples with labour shortages and fluctuating material costs, the potential for increasing house approvals and a downward trend in interest rates might boost demand for new builds.
However, the competition for labour between residential building and public infrastructure projects is likely to keep pushing costs upward.
The construction sector might see sporadic sales in some areas due to decreased building activity, which could lead to price adjustments in specific categories like metal, steel, timber products, and imported fixtures and appliances, Property Council reported.
