Construction costs soar at twice the rate of inflation
No wonder building companies are all broke: Stunning figures show how construction costs are doubling the rate of inflation
- National home construction costs jump 10 percent in the year to June 2022
- This is almost double the 5.1 percent inflation rate – the highest in two decades
- Cordell Construction Cost Index shows biggest jump since GST 2000 debut
- Timber and metal prices soar as companies grapple with labor shortages
Home construction costs have soared at twice the rate of inflation as a series of building companies went bankrupt.
Residential building costs jumped 10 percent in the year to June 2022 as the cost of wood and metal skyrocketed, the Cordell Construction Cost Index showed.
This is nearly double the 5.1 percent inflation rate, which was the fastest pace since 2001.
In New South Wales, construction costs over the last financial year rose by an even more severe rate of 10.1 percent.
In Australia’s most populous state, this is the steepest increase in construction costs since the introduction of GST in 2000.
Home construction costs soared at twice the rate of inflation as a series of building companies went bankrupt (pictured is Probuild workers at Darling Harbor in Sydney in February)
Prior to the 2018-19 pandemic, the average new home in Australia cost $320,200, according to Australian Bureau of Statistics data.
But in May, the median price of building a new home in Australia was $435,374 – when the total value of $4.217bn new homes divided by the 9,687 homes approved for development.
CoreLogic’s construction cost estimation manager John Bennett said Australians were likely to continue to wait longer for their new homes to be built.
‘Lack of labor and materials means delays in turnaround times, which makes builders vulnerable to market changes and storage costs,’ he said.
The wildfires through 2020 have drastically reduced the supply of wood, adding to a spike in building costs.
‘Wood product prices are still rising faster than usual, with volatility remaining,’ the Cordell report said.
Residential building costs jumped 10 percent in the year to June 2022 as wood and metal costs skyrocket, according to the Cordell Construction Cost Index (pictured is a house under construction in Melbourne)
Metal costs also become significantly higher with ‘structural steel, reinforcement, fasteners and fencing all feeling the stress’.
High gasoline prices, back above $2 a liter, and a labor shortage – with unemployment at a 48-year low of 3.9 percent – also added to building costs.
‘Suppliers cited rising fuel, shipping and electricity costs as upcoming challenges for the industry,’ the Cordell report said.
‘It is important to note that other pressures are at play across the residential construction industry, with labor availability and overhead costs impacting costs.
‘Labour availability also affects build times, making builders more open to market changes and storage costs.’
Supply chain constraints have led to a series of construction companies being placed into administration, including building giant Probuild in February.
South African building giant WBHO’s parent company – also known as Wilson Bayly Holmes-Ovcon – told the Johannesburg Stock Exchange that Australia’s Covid-19 border closure and lockdown meant it could no longer profitably build apartment complexes.
Probuild is far from the only victim, with Wulfrun Construction, Westernpoint Construction, Condev, Hotondo Homes in Hobart, Pivotal Homes and Solido Builders recently entering administration.
Supply chain constraints have led to a series of construction companies being placed into administration, including building giant Probuild in February (pictured is a house under construction in Melbourne)
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