No wonder construction companies are all going out of business: Stunning numbers show construction costs are rising DOUBLE as fast as inflation
National home construction costs rose 10 percent in the year to June 2022
This was almost double the inflation rate of 5.1 percent – the highest in two decades
Cordell Construction Cost Index posted the biggest increase since GST 2000’s debut
Wood and metal prices soar as companies struggle with labor shortages
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Home construction costs are rising at twice the rate of inflation as a string of construction companies go bankrupt.
Home construction costs rose 10 percent in the year to June 2022 as the cost of wood and metals skyrocketed, the Cordell Construction Cost Index showed.
This was nearly double the inflation rate of 5.1 percent, the highest rate since 2001.
In New South Wales, construction costs rose by an even more serious rate of 10.1 percent in the past fiscal year.
In Australia’s most populous state, this was the steepest increase in construction costs since the introduction of the GST in 2000.
Home construction costs are rising at twice the rate of inflation as a string of construction companies fail (pictured are Probuild workers in Sydney’s Darling Harbor in February)
Before the 2018-19 pandemic, the average brand-new Australian home cost $320,200, data from the Australian Bureau of Statistics shows.
But in May, the average price to build a new home in Australia was $435,374 — when the total value of $4.217 billion worth of new homes was divided by the 9,687 homes approved for development.
John Bennett, CoreLogic’s construction cost estimate manager, said Australians would likely have to wait longer for their new home to be built.
“A shortage of labor and materials means a delay in completion times, leaving builders vulnerable to market changes and holding costs,” he said.
Forest fires up to 2020 have drastically reduced the supply of wood, contributing to the rise in construction costs.
Wood product prices are still rising faster than normal as volatility continues, the Cordell report said.
Home construction costs rose 10 percent in the year to June 2022 as the cost of wood and metals skyrocket, according to the Cordell Construction Cost Index (pictured is a house under construction in Melbourne)
The cost of metal is also getting a lot more expensive with ‘structural steel, rebar, fixings and fencing all feeling the pressure’.
High gasoline prices, back above $2 a liter, and labor shortages — with unemployment at its 48-year low of 3.9 percent — are also contributing to construction costs.
“Suppliers cite rising fuel, freight and electricity costs as future challenges for the industry,” the Cordell report said.
“It’s important to note that there are other pressures in the housing sector where labor availability and overheads impact costs.
“Manpower availability also affects construction times, leaving builders more exposed to market changes and holding costs.”
Supply chain restrictions have resulted in a range of construction companies being placed under administration, including construction giant Probuild in February.
The South African parent company of construction giant WBHO – aka Wilson Bayly Holmes-Ovcon – told the Johannesburg Stock Exchange that Australia’s Covid border closures and lockdowns meant it could no longer build apartment complexes profitably.
Probuild was far from the only casualty, with Wulfrun Construction, Westernpoint Construction, Condev, Hotondo Homes in Tasmania, Pivotal Homes and Solido Builders recently going into administration.
Supply chain restrictions have resulted in a range of construction companies being placed under administration, including construction giant Probuild in February (pictured is a house under construction in Melbourne)