Construction costs rise at double usual rate
Quarterly housing construction costs are rising at double the typical pace.
The Cordell Construction Cost Index (CCCI) indicates national costs rose 1.6 per cent in the three months to September, which was well above the typical quarterly increase of about 0.8 per cent.
Annual construction cost growth rose 5.5 per cent in the year to September, which was the fastest annual rate since the first quarter of 2018.
Timber, particularly structural timber and cladding, was the key contributor to overall cost increases. Metal costs and products were also a factor.
CoreLogic chief property economist Kelvin Davidson says it is likely the construction industry will remain busy for some time to come.
"Cost pressures as shown by the CCCI may get worse before they get better," he says.
"Indeed, anecdotal evidence suggests that the latest lockdowns will simply sustain the disruptions on supply chains and construction material costs."
Demand for new builds was likely to continue to drive demand and prices, says Kelvin.
"Investors are also now strongly incentivised to buy new builds, due to their exemption from the loan to value ratio rules and continued ability to claim mortgage interest as a deductible expense for the first 20 years of a property's life.
"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."