Latest Construction Cost Data Reveals Exposed Strata Property Owners

Author: Zac Gleeson, Managing Director of GQS

Source: ABS

Today 28 January 2022, the Australian Bureau of Statistics (ABS) have released their latest statistics in regards to construction costs nationwide. An extremely 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 December 2021 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margins and labour costs, it is very likely valuations and forecasts completed as little as 12 months ago are now outdated.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 3.9% in the December quarter compared to 3.7% in the quarter prior. This quarter led by TAS  (+7.2%), QLD (+6.5%) and SA (+6.3%). Residential house construction costs in TAS, QLD and WA have now all increased by 15-20% in the last 12 months alone, SA closely follows with a 14.6% annual increase.

These increases in residential house construction costs have been driven by input costs into the industry which have risen by 3.8% last quarter compared to 4.0% in the September quarter prior. Timber, board and joinery again leading the front in price rises due to continued supply shortages on timber, notably structural timber up 15.4% last quarter and 9.3% the quarter prior. Other notable increases driving up input costs are Aluminium windows and doors (+7.9%), steel beams and section (+11.1%) and carpets and floor coverings (+4.2%) 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 2.2% across the nation last quarter compared to 1.0% in the September quarter. Rising head contractor margins have been recorded in NSW, VIC, WA and SA indicating increased activity as well as caution in regards to the continuing inflation of materials and sub-contractor costs. Over the past twelve months other residential building costs have increased by 5.6% on average across the nation, led by TAS and WA (12.6%) and QLD (7.9%).

Non-residential construction costs (including commercial projects) recorded a 2.3% quarterly rise across the country and a 6.4% annual increase. NSW, QLD, WA and TAS all having increased by 8-15% over the past twelve months. Most states again recording increases in head contractor margins and preliminary costs.

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].