Building and renovation costs continue to rise, making it more important than ever to budget accurately.
Construction costs in Australia rose 7.3% in 2021, according to the latest Cordell Construction Cost Index. It’s the steepest rise since 2005 and a lot of the blame is being placed on the Covid pandemic.
The index – owned by industry researcher CoreLogic – found the pace of price increases softened to 1.1% in the last quarter of 2021. That’s in line with the five-year average but follows a hike of 3.8% in the previous quarter.
Construction cost increases for 2021 were steepest in WA and SA, where they went up 7.9% for the year, followed by Queensland at 7.3%. Victorian construction rose 7.1% and NSW went up by 7%.
CoreLogic research director Tim Lawless predicted costs are likely to continue to rise due to the strong demand for residential construction and COVID-related supply chain disruptions.
“There is a significant amount of residential construction work in the pipeline that has been approved but not yet completed,” he says.
The price of structural timber is a key factor in the latest inflationary pressures, and Mr Lawless believes new homes and renovations will become more expensive.
If you’re looking to build your own home, you should set aside at least 20% of your budget for unforeseen problems, delays due to shortages of materials and even mid-project price increases.
If you are looking to make substantial renovations to your home, there are a few ways to fund the construction such as accessing equity in your existing property or taking out a smaller new loan. As a broker, I can walk you through all your options and help you crunch the numbers so you can make the improvements you want to your property. So feel free to give me a call – I can talk you through your options.