- Residential construction costs rose by 0.8 per cent over the first three months of 2021 as new home sales dropped 54.4 per cent during April
- The latest rise is part of a larger trend of growth, with the 0.8 rise being the sixth consecutive quarter where costs have risen by one per cent or less
- In the first index for 2021, national residential construction costs rose 3.3 per cent annually
- National construction cost consultants Rawlinsons reported higher cost increases in their recent quarterly update amongst the wider construction industry, including housing and infrastructure
- As the HomeBuilder scheme came to an end, sales fell in April 2021 to be 54.4 per cent lower than March, according to HIA.
Residential construction costs rose by 0.8 per cent over the first three months of 2021 as new home sales dropped 54.4 per cent during April.
CoreLogic’s national Cordell Housing Index Price (CHIP) measures the rate of change of construction costs within the residential market and covers freestanding and semi-detached single and two-storey dwellings.
The latest rise is part of a larger trend of growth, with the 0.8 rise being the sixth consecutive quarter where costs have risen by one per cent or less.
In the first index for 2021, national residential construction costs rose 3.3 per cent annually.
National construction cost consultants Rawlinsons reported higher cost increases in their recent quarterly update amongst the wider construction industry, including housing and infrastructure.
The company reported that between December 2020 and March 2021, Canberra and Sydney saw the biggest jump in construction costs, with an increase of two per cent.
In other cities, the cost of construction increased by 1.5 per cent in Brisbane, 0.75 per cent in Adelaide, one per cent in Hobart and Melbourne, and 0.60 per cent in Perth.
“With dwelling approvals surging in response to the recently expired HomeBuilder grant, the residential construction sector is moving into what is likely to be an extended period of activity, however we are yet to see Cordell’s measure of construction costs reflect any material increase,” CoreLogic research director Tim Lawless said.
“Construction costs were up 0.8 per cent over the March quarter, slightly below the decade average rate of growth and with little in the way of variation across the states,” he added.
“Although construction costs rose at a slightly slower than average pace last quarter, it’s likely future quarters will record a more substantial lift in construction costs as shortages of both materials and labour add some upwards pressure on prices,” Lawless concluded.
New home sales plummet
There is plenty of work on the cards for home builders after months of record new home sales.
According to seasonally adjusted ABS numbers, the overall number of dwellings approved increased by 17.4 per cent in March, following a 20.1 per cent increase in February.
However, as the HomeBuilder scheme came to an end, sales fell in April 2021 to be 54.4 per cent lower than March, according to HIA.
“A cooling in sales is to be expected as the grants available through the HomeBuilder program came to an end in March,” HIA economist Angela Lillicrap said.
“There is an unprecedented volume of building starts set to occur in 2021. HomeBuilder and lower interest rates have facilitated in a surge in demand for detached homes that ensures a record number of new detached homes will be built this year and into 2022.”
The industry group also said that the building industry is continuing to attract workers because of the boom in home construction.
Despite this demand, in the three months leading up to February 2021, employment in the construction sector, which employs about 8.9 per cent of the overall population, dropped 2.37 per cent, according to seasonally adjusted ABS data.