Latest Update: Construction Costs Continue to Rise But are Starting to Show Signs of Slowing

Author: Zac Gleeson, Managing Director of GQS

Source: ABS

Recently, 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 December 2022 quarter again show an 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 for imported products, high demand for finishing materials and skilled labour shortages, it is very likely valuations and forecasts completed as little as 12 months ago are now outdated.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 the states (but not the territories – NT and ACT), this time by 1.1% which is slower than recent quarters but still a massive 17.2% rise over the past twelve months. This quarter was led by SA (+1.8%), NSW (+1.8%) and TAS (+1.2%). Residential house construction costs in NSW, VIC, QLD, SA and WA have all increased by over 15% in the last 12 months alone.

These increases in residential house construction costs have been driven by ongoing skilled trades labour shortages and rising input costs into the industry which have again risen by 2.2%. Input costs have remained strong but are easing from historic highs. Finishing materials such as plywood, glass, plasterboard, and carpet are leading the front in price rises due to continued sustained high activity in the sector and suppliers passing on high fuel and energy costs.

Other residential building construction (including multi-dwelling projects; townhouses, apartments etc.) prices have risen by 1.9% across the nation, which is slightly higher than last quarter. This increase has been lead by strong growth in VIC and SA especially. VIC rising 4.2% in the December quarter. The same story as house construction with increases driven by ongoing skilled trades labour shortages and rising input costs into the industry especially finishes materials. Over the past twelve months other residential building costs have increased by 8.1% on average across the nation, led by TAS (+11.5%), VIC (+9.7%) and NT (+9.3%).

Non-residential construction costs (including commercial projects) increased across all the states and territories except for WA recording a 1.9% quarterly average rise across the country and a 8.7% annual increase. NSW, VIC, QLD, NT and TAS all having increased by 9.5-11% over the past twelve months. Predominantly the increase this quarter was due to strong growth in Victoria and South Australia input costs continued to be passed through from suppliers and skilled labour remained in high demand. Interestingly Western Australia recorded a decrease due to falling steel prices and reduced costs for beginning stage skilled trades, such as masonry and structural construction.

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].