Home building costs increased by a record 10.4% during the 12 months to December, according to CoreLogic’s Cordell Construction Cost Index.
That beats the record set the previous quarter, when residential construction costs rose 9.6% in the year to September 2022.
Thankfully, prices are increasing at a decreasing rate – they jumped 3.4% in the third quarter of 2022 but only 1.7% in the final quarter.
The Cordell Construction Cost Index measures the cost to build a typical 200sqm, single-storey brick and tile house with three bedrooms and two bathrooms.
Supply chains remain tight, but are improving
CoreLogic chief property economist Kelvin Davidson said a surge in new builds, materials supply issues, labour shortages and completion delays had all contributed to the surge in building costs during 2022.
Mr Davidson warned that while new dwelling approvals had slowed, the “huge” pipeline of consents that had already been granted meant there was a large backlog of work waiting to be completed.
“Although the supply chain issues for building materials, such as plasterboard, have eased considerably, overall capacity pressures are still a concern,” he said.
“We can see the lingering strains clearly in the December quarter construction cost figures (1.7% rise), which were the lowest for the year, however the index is still running above the ‘normal’ increase of about 1% per quarter.”
Mr Davidson forecast that price rises for the 12 months to March 2023 would still be around 10%, before declining over the rest of the year.
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