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National residential construction costs rose by 9 per cent over the year to March, the highest annual growth recorded by CoreLogic, outside of the GST being introduced.
CoreLogic’s Cordell Construction Index (CCCI) had a growth rate of 2.4 per cent during the March quarter, more than double the previous quarter but below the 3.8 per cent surge over the three months to September.
For the year to March, there was the second-highest annual growth rate, second only to the 10.2 per cent recorded over the 12 months to March 2001 (when the GST was introduced).
According to CoreLogic research director Tim Lawless, the annual change in construction costs is now approaching double digits.
“Construction cost growth adds a further element of uncertainty to new building projects and renovations as well as inflationary pressures to the economy,” Mr Lawless said.
The building industry and new home buyers are tipped to feel impacts, but the effect isn’t expected to subside.
“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,” Mr 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.”
John Bennett, construction cost estimation manager at CoreLogic commented timber, metals and imported products are driving much of the growth.
“Timber costs continue to rise, with cladding, decking and other timber items affected. Steep rises in metal prices are also now flowing through to the market, with structural steel, fixings and metal components hit hard,” Mr Bennet said.
“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.”
Across states, Queensland recorded the lowest quarterly rise in construction costs over the March quarter (2.2 per cent), while South Australia saw the highest quarterly growth of 2.5 per cent.
NSW, Victoria and Western Australia each rose by 2.4 per cent, in line with the national growth rate.
Across NSW and Victoria, construction costs were up by 8.8 per cent for the year to March, the fastest pace of annual growth since the 12 months to June 2001.
Western Australia on the other hand had an annual growth rate of 9.5 per cent, significantly above its decade average of 4.2 per cent.
South Australia’s CCCI on the other hand was up by 9.8 per cent from the year prior.
Mr Lawless also noted that home owners should consider their insurance.
“With construction costs up more than 25 per cent over the past five years, it’s important for home owners to reassess their insurance terms and make sure they are adequately covered should they need to make a claim,” he said.
[Related: Melbourne and Sydney suburbs at forefront of value declines]
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