Construction costs surge

Construction costs just rose at the fastest annual pace since 2005.

So, why is it getting so expensive to build your own home?

Well, for starters, national construction costs increased 7.3% recently, which was the highest annual growth rate since March 2005.

And the not-so-great news is that property market data company CoreLogic is expecting growth in residential construction costs to remain above average over the coming quarter as supply chain disruptions persist.

“There is a significant amount of residential construction work in the pipeline that has been approved but not yet completed,” explains CoreLogic research director Tim Lawless.

Data shows that cost increases are being driven primarily by timber (mostly structural timber).

In fact, the value of select wood imports reached their highest level on record, says Housing Industry Association (HIA) economist Thomas Devitt.

“Timber is predominantly produced domestically but excess demand is largely sourced from overseas markets,” says Mr Devitt.

Other segments of the market also remain volatile, with increasing pressure currently on metal costs.

And with building approvals for detached housing recording their strongest year on record, demand isn’t expected to slow down anytime soon.

Mr Lawless says: “With such a large rise in construction costs over the year, we could see this translating into more expensive new homes and bigger renovation costs, ultimately placing additional upwards pressure on inflation.”