Construction costs set to ease?
Despite persistent labour shortages and price volatility in materials such as timber and metal, there are indications that the pressure on construction costs is beginning to ease.
According to the Cordell Construction Cost Index (CCCI) by CoreLogic, which tracks the cost to build a typical new home, the growth rate for the first three months of 2023 was 0.9 per cent, a level not seen since March 2021.
The quarterly growth rate was less than half the Q4 2022 figure of 1.9 per cent, and there was a significant slowdown compared to the September quarter results of 4.7 per cent.
The annual growth rate of 10.2 per cent eased back from an index high of 11.9 per cent recorded in the 12 months to December 2022, which was the largest annual increase on record, excluding the period impacted by the introduction of the GST.
The news will be welcomed for the many developers set to undertake projects across the state, including Consolidated Properties Group who recently launched their Toowong project Monarch Residences as well as Sekisui Australia who are currently underway with their West End project, West Village.
Although the growth in construction costs is easing, the annual rate of change remains 2.8 times higher than the pre-COVID five-year average of 3.6 per cent. Queensland had the highest quarterly and annual growth changes of 1.2 per cent and 11.6 per cent, respectively.
CEO of Gold Coast based Orchard Property Group, Ted Cronin, said the easing of construction costs is welcome news for the housing industry, which has been struggling to keep up with demand due to high costs and supply chain issues.
“Construction costs are finally showing signs of easing after two years of consistent increases, which is extremely positive news for both homeowners and builders.” said Cronin.
“This is a great development for the industry, as we've seen many builders and contractors struggle with rising costs over the past few years.
“We faced significant supply and resource constraints on the delivery of subdivisions compounded by timber shortages for builders, and that led to a lot of frustration for all of us, including buyers.”