A surge in the cost of construction materials shows no sign of ending, as supply chain shortages and soaring prices for key inputs including fuel and electricity feed into the property market.
As the Reserve Bank pushes up official interest rates to take inflationary pressures out of the economy, data from Cordell and CoreLogic show construction costs nationally lifted another 2.4 per cent in the June quarter after a similar increase through the first three months of the year.
Over the past 12 months, construction costs have lifted by 10 per cent, the fastest rate on record with the exception of a spike due to the introduction of the GST more than two decades ago.
Costs are going up at a similar rate across the country, with prices growing by 2.5 per cent in the June quarter in both NSW and Victoria, 2.3 per cent in Queensland and Western Australia and by 2.2 per cent in South Australia.
Construction cost estimation manager with CoreLogic, John Bennett, said the cost of metal, structural steel, reinforcings, fixings and fencing were all growing while timber product prices remained elevated.
Prices across the masonry industry continue to rise sharply, especially for clay brick and paving products. There has also been a lift in the prices of imported appliances and fit-out items.
“Suppliers are frequently mentioning the impact of rising fuel, freight and electricity costs on their bottom line and these are significant additional challenges being faced by the industry,” he said.
“It is important to note these factors only add to other pressures that have impacted the residential construction industry for 18 months now, such as labour availability and overheads. A shortage of labour and materials means a delay in completion times, which leaves builders vulnerable to market changes and holding costs.”
The residential construction sector has remained under pressure throughout the past two years as record-low interest rates drew prospective home builders into the market.