After more than two years of unabated increases in the price to build a new home or renovate, the pressure on construction costs has come off the boil, despite lingering volatility among individual material types.
CoreLogic’s Cordell Construction Cost Index (CCCI), which tracks the cost to build a typical new home, returned a quarterly growth rate of 0.7% for the June quarter, the lowest rate since September 2020 and well below the 1.2% decade average.
The quarterly growth rate has eased from Q1’s 0.9% and is a significant deceleration compared to the index growth peak of 4.7%, recorded in September 2022.
On an annual basis, the national CCCI increased by 8.4%. CoreLogic Construction Cost Estimation Manager John Bennett said while the national annual growth rate remained high, it was an improvement on last year’s 11.9%, which was the largest annual index rise on record, excluding the impact from the introduction of the GST in 2000.
“While the annual growth figure remains high it’s the lowest level it’s been since the 12 months to December 2021,” Mr Bennett said.
“The latest index figures will bring some comfort and reassurance to the beleaguered building and construction industry as we’ve seen two consecutive quarters of growth more in line with long-term averages.”
Despite the positive trend, Mr Bennett warned there was ongoing volatility within different product types, however the significant increases of the past year had subsided.
“The CoreLogic costings team is recording some volatility and a large amount of variation across material types, but overall there’s a softening and stabilisation within products such as metal and timber prices.”
“There’s been a significant drop off in dwelling approvals in the year to April, which will flow through to prices. As the level of residential construction work reduces pressure on material costs and labour supply is likely to reduce further.”
Queensland had the highest quarterly and annual growth changes of 0.7% and 9.9% respectively.