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National housing construction costs explode, rising at fastest rate since introduction of the GST

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National housing construction costs explode, rising at fastest rate since introduction of the GST

 

A surge in new builds and renovations coupled with supply chain disruptions and a shortage of materials has resulted in an unprecedented spike in construction costs.

CoreLogic’s quarterly measure of residential construction costs reveals a national increase of 3.8% was recorded in the three months to September 2021, outpacing the Consumer Price Index of 0.8% for the same period.

The Cordell Construction Cost Index (CCCI), formerly known as the Cordell Housing Index Price (CHIP), shows this is the largest quarterly increase since Q3 2000, when construction costs increased 7.2% after the introduction of the GST. Nationally the annual CCCI increase was 7.1%, the highest yearly growth rate since March 2005.

CoreLogic’s Research Director Tim Lawless said the surge in dwelling approvals, which peaked in March, was now progressing through to construction, causing wide spread demand for materials and trades.

This increased construction activity has coincided with a disruption to supply chains and had placed further pressure on the building industry, which was dealing with a severe shortage of materials.

“The quarterly rate of growth in construction costs is happening everywhere and is not restricted to one city or state, it’s a national trend,” he said.

“There was a much bigger increase in our index when the GST was introduced, however outside of that structural adjustment this is by far the biggest quarterly change on record. This would be the largest market driven increase we’ve seen.

“For anyone who is looking to build or to renovate, or for someone who owns a business involved in the residential construction industry, it means they are all likely to be facing significantly higher costs.”

The Cordell costings team has continued to see pricing volatility in the Australian market, with quarterly price rises primarily driven by increasing timber costs, notably structural timber, metal products and plumbing supplies.

Key Findings – Q3 2021 CCCI Report

  • The New South Wales CCCIincreased 3.8% in the September quarter compared to the 1.3% increase recorded in the three months to June 2021. The state’s annual growth rate of 6.6% is the highest on record.
  • Victoriarecorded the lowest quarterly increase of all five states, up 3.5% in the three months to September. However, it is the largest quarterly growth Victoria has recorded since the GST was introduced in 2000. Victoria’s annual construction cost growth rate is 6.8%.
  • Queensland’s CCCIincreased 3.8% during the September quarter, taking its annual increase to 8.0%, the highest in Australia. It is Queensland’s most significant annual rise in residential construction costs on record.
  • The CCCI forWestern Australiaincreased 4.3% for the quarter, up significantly on its June quarterly growth rate of 1.4% and the fastest pace of growth in construction costs since the GST was introduced in 2000.
  • South Australiarecorded the highest quarterly increase in the CCCI across the five largest states, up 4.4% in the three months to September, taking its annual growth rate to 7.5%.

The full embargoed release and Cordell Construction Cost Index are attached to this email. Please send interview requests to CoreLogic media at media@corelogic.com.au

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