Construction Costs Continue To Rise, Leaving Strata Property Owners Exposed

Author: Zac Gleeson, Managing Director of GQS

Source: ABS

Last Friday, the Australian Bureau of Statistics (ABS) released their latest statistics in regards to construction costs nationwide. Still a hot topic in the media and property / construction circles since the COVID-19 pandemic hit our shores in early 2020, construction costs have been soaring across the country and the latest statistics relating to the September 2022 quarter again show a very alarming story for strata property owners.

If there was ever a time for strata communities and bodies corporate across the country to regularly review their building insurance value and capex forecasts (sinking funds, reserve funds, maintenance funds depending on state/territory) it is NOW! With alarming increases in construction costs driven by supply chain disruptions, material shortages, increased market activity, increased margins and labour costs, it is very likely valuations and forecasts completed as little as 12 months ago are now outdated. Without review this could lead to major financial consequence to Lot Owners through being under-insured or not sufficiently funded for major upcoming planned capital works.

Depending on the State/Territory of the property most body corporate or strata community legislation requires an independent insurance valuation or capex forecast at least every 5 years to ensure compliance with the relevant legislation. It is ours at GQS’ strong recommendation that this is far too long to go between independent expert reviews as you will very likely be left unnecessarily exposed. Our team of Quantity Surveyors and Partners are on hand across the country ready to assist you in navigating these tricky times for all committees.

A quick wrap of the latest ABS statistics below: 

Residential house construction prices increased across all capital cities again, this time by 4.2% in the September quarter resulting in a massive 20.5% rise over the past twelve months. This quarter led by TAS  (+6.9%), SA (+6.8%) and NSW (+4.6%). Residential house construction costs in QLD, SA, WA and VIC  have now all increased by over 20% in the last 12 months alone.

These increases in residential house construction costs have been driven by input costs into the industry which have again risen, albeit by 2.9% last quarter which compared to last quarter’s rise of 4.3%, shows a clear sign of slowing. Timber, board and joinery again leading the front in price rises due to continued supply shortages on timber, high freight costs and timber windows due to increased glass prices. Other notable increases driving up input costs are Aluminium windows and doors (+3.8%) and plaster products (+3.0%) all of which note prices further down the chain driving increases in prices.

Other residential building construction (including multi-dwelling projects; townhouses, apartments etc.) prices have risen by 1.8% across the nation lead by QLD rising 2.3% in the September quarter. Tightened availability of skilled trades, increased costs for imported materials, and high prices for steel, timber, and concrete continue to place upward pressure on input costs. Over the past twelve months other residential building costs have increased by 8.4% on average across the nation, led by NSW (+11.0%), TAS (+10.6%) and WA (+9.9%).

Non-residential construction costs (including commercial projects) increased again across all states recording a 1.8% quarterly rise across the country and a 9.2% annual increase. NSW, QLD, NT, WA and TAS all having increased by 9-12% over the past twelve months. Material price rises are being driven by elevated steel, reinforcement and concrete prices and continuing higher freight costs. Increased activity in the non-residential market, and ongoing competition for skilled trades from across the construction and mining industries has placed additional pressure on labour cost.

For an obligation free health check of your property’s insurance value or reserve/sinking fund balance please do not hesitate to contact GQS on 1300 290 235 or [email protected].