Construction costs grew 11.9% across Australia in 2022, marking the largest yearly rise on record since the introduction of the GST.
The construction industry has faced extreme periods of pricing volatility over the past 18 months to two years due to restricted domestic supply chains, material and labour shortages.
CoreLogic found construction costs grew 1.9% during the December 2022 quarter, showing a dramatic easing following September’s quarterly increase of 4.7%.
CoreLogic Construction Cost Estimation Manager John Bennett said the most recent quarterly figures reflected the post-COVID operating period, which had been hampered by rising rates and high inflation.
“Although the annual CCCI remains high, on a quarterly basis there’s been an easing in residential construction costs,” Bennett said.
“This reflects a pull back from consumers, builders and will eventually flow through to suppliers, as projects are delayed or put on hold in the current economic environment.”
The biggest contributors have been volatile timber prices, with fluctuations in structural timber costs and general increases to timber products.
Prices for metal products such as gutters, lintels and fixings that were typically used for roofing and structural purposes continued to increase, and concrete values also remained unstable.
Petrol price rises were affecting cartage and delivery costs, notably concrete, however larger items such as rainwater tanks were also affected.
Bennett said he didn’t expect 2023 costs to continue to grow at the same rapid pace as they had done in the past 18 months as consumers, builders and suppliers proceeded with caution against a backdrop of rising rates and inflationary pressures.
CoreLogic Research Director Tim Lawless said dwelling approval figures had dropped by 41% since moving though historic highs in March 2021.
Despite a substantial pipeline of residential construction work still to be completed, the drop off in consents was expected to help reduce some of the pressure on the industry.
Although there remains a shortage of labour, the opening of borders and arrival of skilled workers was also expected to eventually flow through to the construction industry.
“Although a large number of homes remain under construction, the dwindling number of approved homes in the construction pipeline should help to alleviate construction costs down the track,” Lawless said.
“Anecdotally, as skilled migration continues to ramp up, we should see the costs associated with some trades and labour slow further.”