Despite persistent labor shortages and fluctuations in the prices of raw materials like timber, metal, and petroleum, the skyrocketing costs associated with building or renovating a house have shown signs of easing up after two years of uninterrupted growth.
CoreLogic’s Cordell Construction Cost Index (CCCI), which tracks the cost to build a typical new home, returned a growth rate of 0.9 per cent for the first three months of 2023, 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 a dramatic 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, the largest annual increase on record, excluding the period impacted by the introduction of the GST.
CoreLogic Construction Cost Estimation Manager John Bennett said while the national annual growth rate was still relatively high, the building and construction industry would take comfort in the quarterly figure returning more in line with long-term averages.
He said there had been a gradual easing in the growth of construction costs in the past six months, as demand for materials reduced due to shelved or delayed projects on the back of higher interest rates and weaker consumer confidence.
Mr Bennett said it was the first-time the index quarterly growth rate had slipped below one per cent since March 2021 and was finally below the five-year average of 1.4 per cent.
Meanwhile, the latest annual comparison of international construction costs released by global consultancy Arcadis showed that Australia’s main cities have become more expensive to build in during 2022 when compared to other global cities.
Arcadis’ 2023 International Construction Costs (ICC) index, ranking the relative cost of construction in 100 cities, showed that Sydney remained the most expensive Australian city for construction in 2022 and climbed the global ranking to 36, four places up on the previous year.
Other Australian cities also were less expensive in 2022 compared to similar cities overseas – Melbourne came in at 49 (maintaining the same place as last year), Brisbane at 46 (up from 50 last year) and Perth at 57 (up from 61). The exception is Adelaide which ranked at 63, down from 60 last year.
Globally, Geneva has overtaken London as the most expensive city in the world in which to build. London has slipped to second place, followed by New York (3rd) and San Francisco (4th), which have edged one and two places respectively further up the global rankings thanks to their escalating construction costs.