Home Property Australia Residential construction costs pick up pace

Residential construction costs pick up pace

  • October 16, 2024
  • by Property Australia
Residential construction costs grew one per cent over the September quarter

Residential construction costs grew one per cent over the September quarter, in line with the pre-Covid decade average, according to CoreLogic’s latest Cordell Construction Cost Index (CCCI). 

The Q3 2024 national CCCI, which tracks the cost to build a typical new dwelling, is up from a 0.5 per cent rise over the June quarter and is the strongest quarterly increase seen from the three months to December 2022 (1.9 per cent).

The 12 months ending September saw costs rise 3.2 per cent, up from 2.6 per cent over the 12 months to June, although down from this time last year (four per cent).

CoreLogic Economist Kaytlin Ezzy said the data would likely put additional pressure on the federal government’s target of 1.2 million new homes.

“With the official start date for the Government’s target for 1.2 million new well-located homes over five years kicking off in July, the recent re-acceleration of the CCCI could put additional pressure on an already difficult-to-achieve goal.”

“Over the year to June, approximately 176,000 dwellings were completed, -26.6 per cent below the 240,000 annually needed to fulfil the target.”

“While 250,000 homes remain within the construction pipeline nationally, the sluggish flow of new dwelling approvals suggests a shortfall of projects once the backlog is worked through.”

On a state-by-state basis, the quarterly change in CCCI was highest in Queensland, recording the largest quarterly increase in construction costs (1.1 per cent), accelerating from the 0.3 per cent lift seen over the June quarter.

New South Wales and Western Australia saw construction costs rise one per cent, in line with the national growth rate, while Victoria and South Australia tied for the smallest quarterly increase, both up 0.8 per cent over the quarter.

CoreLogic Construction Cost Estimation Manager John Bennett said building materials costs had stabilised, with minimum increases and decreases being recorded for the quarter.

He said categories such as timber products, building permit and application costs, plant hire and rainwater products demonstrated little movement for the quarter, while masonry, cement sheet products, joinery, plumbing material (mainly copper) and general waste disposal all showed slight increases.

“This quarter has shown no standout specific trends in the market for construction cost materials.  We fully expect this to continue for the coming months,” Mr Bennett said.

The latest Consumer Price Index (CPI) data from the Australian Bureau of Statistics (ABS) showed the CPI rose a further one per cent over the June quarter, following a one per cent rise over the March quarter.