Rising construction costs break 2005 record
In 2021, construction costs across the nation saw the highest annual growth rate since March 2005, despite a slowing of increases towards the end of the year.
Data from CoreLogic’s Cordell Construction Cost Index (CCCI) for Q4 2021 indicates that despite national residential construction costs easing to growth of 1.1 per cent in the December quarter from an accelerated 3.8 per cent high in Q3, growth rates still surged to 7.3 per cent over the 2021 calendar year.
According to CoreLogic research director Tim Lawless, the national trend of reducing quarterly growth while annual growth remains at recent highs has been the same for the five states and territories included in the report.
Victoria saw the highest increase for Q4 at 1.2 per cent, followed by Queensland, Western Australia, and South Australia at 1.1 per cent, and NSW at 1 per cent.
Easing of the latest quarterly growth rate has brought back figures to the five-year average and lower than the consumer price index of 1.3 per cent for the same time period.
Mr Lawless opined that the lesser gain throughout the quarter might represent “some rebalancing in the index after Q3’s jump”.
But the smaller rise may just be temporary, Mr Lawless added, as challenges in the construction supply chain, such as high volume of scheduled builds and lack of timber and metal, may further push construction prices and housing values above the industry average.
“There is a significant amount of residential construction work in the pipeline that has been approved but not yet completed,” said Mr Lawless.
And how can these market factors impact home buyers?
“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,” explained Mr Lawless.
Matthew Walker, CoreLogic’s head of insurance solutions, highlighted that aside from renovators, builders, and companies, growing construction prices also affect home owners and property investors who may overlook the risks associated with under insurance of their assets.
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