Construction Costs Rising at the Fastest Annual Pace Since Introduction of the GST
CoreLogic’s Cordell Construction Cost Index (CCCI) for Q1 2022 showed national residential construction costs increased 9% over the 12 months to March 2022, the highest annual growth rate on record outside of the introduction of the GST (10.2% over the year to March 2001).
The CCCI quarterly growth rate reaccelerated in Q1 2022 to 2.4%, more than double Q4 2021 (1.1%) but below the 3.8% surge over the three months to September 2021.
CoreLogic Construction Cost Estimation Manager, John Bennett, says Cordell data shows 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.
“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,” says Mr Bennett.
CoreLogic Research Director Tim Lawless says the annual change in construction costs is approaching double digits, with the impact multi-layered.
“Construction cost growth adds a further element of uncertainty to new building projects and renovations as well as inflationary pressures to the economy,” says Mr Lawless.
“While the most obvious impact from high residential building costs are with builders, new home buyers and renovators, another important consideration is the sum insured by home owners. With construction costs up more than 25% 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.”
Queensland recorded the lowest quarterly increase in construction costs over Q1 2022 (2.2%), while South Australia saw the highest quarterly growth (2.5%). New South Wales, Victoria and Western Australia each rose 2.4%, in line with the national growth rate.
Mr Lawless says “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. 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.”
CoreLogic researches, tracks and reports on materials and labour costs which flows through its Cordell construction solutions to help businesses make better decisions, estimate rebuild and insurance quotes easily and, ultimately, price risk effectively.
Key findings by state – Q1 2022 CCCI Report
- CCCI in New South Wales and Victoria increased 2.4% over the March quarter, taking both states’ annual growth rate to 8.8%. This is the fastest pace of annual growth in construction costs for NSW and Victoria since the 12 months to June 2001.
- Western Australia’s CCCI rose 2.4% over the March quarter and 9.5% annually, significantly higher than the state’s decade average annual growth rate of 4.2%.
- Queensland’s CCCI increased 2.2% over Q1 2022, the lowest of the states. The sunshine state’s annual growth is now at 8.7%.
- South Australia recorded the highest quarterly and annual growth rates of the states, as 2.5% and 9.8% growth respectively.
The CCCI report measures the rate of change of construction costs within the residential market and covers freestanding and semi-detached single and two storey homes.
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