According to the national CCCI, residential construction costs increased by 11.0% over the 12 months to September, exceeding the 10% annual rise recorded over the 12 months ending June 2022, while the quarterly figure of 4.7% was higher than the previous quarterly figure of 2.4%. The most recent quarter’s figure was also above the 3.8% surge recorded over the three months to September 2021 when lockdowns were having a more significant impact on domestic supply chains.
CoreLogic Construction Cost Estimation Manager, John Bennett, said the Cordell costings team were continuing to see costs rising, especially across timber and metal materials, which was affecting framing and reinforcing.
“In particular we are recording significant volatility in pre-fabricated framing and the range of products affected by higher building material costs is only growing, with many suppliers having little choice but to pass on price increases,” he said.
“This quarter has also shown a larger increase in the cost of wall linings, including plasterboard and fibre cement, which previously had been relatively stable. It will cost you more to get into your house too, with the price of doors showing a sharp rise in the last quarter.”
Mr Bennett said while some suppliers have noted a stabilisation in sea freight prices it was the increasing cost of raw materials, labour and fuel that continues to place upwards pressure on residential construction costs.
“We’re also seeing this flow into other sectors. We’re seeing a large increase in waste disposal fees across most states, and volatility in professional fees and services, with Victoria and Queensland showing the highest cost increases,” he said.
The quarterly index change ranged from a low of 3.3% in Western Australia and 3.8% in South Australia to 4.0% in NSW, 5.8% in Queensland and 5.6% in Victoria. Construction costs over the September quarter were the largest increase on record excluding the September 2000 quarter which was impacted by the GST. Annually, Victoria recorded the largest growth rate of all states, with residential construction costs increasing by 12.3% over the 12 months to September 2022.
Mr Bennett said the industry is facing significant additional challenges each quarter, with suppliers having dealt with the impact of rising fuel, freight and electricity to their bottom line for more than 18 months.
“A shortage of labour and more expensive overheads continue to have a bearing on the industry and its impact on the residential construction industry has not been lost with ongoing delays to completion times and a blow out to builders holding costs during a period of market change.”
CoreLogic Research Director Tim Lawless said while the rising cost of construction was not new, the persistent increase in construction costs would continue to have a big impact nationally.
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