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Construction costs have eased in the June quarter following two years of persistent price increases in building or renovating, CoreLogic confirmed.
CoreLogic’s Cordell Construction Cost Index (CCCI) — an index used to track the cost to build a typical new home — returned a quarterly growth rate of 0.7 per cent for the June quarter in construction costs, marking the lowest rate since September 2020, and below the decade average of 1.2 per cent.
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The quarterly growth rate eased from the first quarter’s 0.9 per cent growth rate and a substantial deceleration when compared to the index growth peak of 4.7 per cent recorded in September last year.
The national CCCI increased by 8.4 per cent on an annual basis, however, this decreased from the 11.9 per cent recorded last year, which was the largest annual index rise on record (excluding the impact from the introduction of the GST in 2000), according to CoreLogic construction cost estimation manager John Bennett.
“While the annual growth figure remains high it’s the lowest level it’s been since the 12 months to December 2021,” Mr Bennett said.
“The latest index figures will bring some comfort and reassurance to the beleaguered building and construction industry as we’ve seen two consecutive quarters of growth more in line with long-term averages.”
However, Mr Bennett warned there was ongoing volatility within different product types, despite the positive trend and the large increases of the past year subsiding.
“The CoreLogic costings team is recording some volatility and a large amount of variation across material types, but overall, there’s a softening and stabilisation within products such as metal and timber prices,” Mr Bennett said.
“There’s been a significant drop-off in dwelling approvals in the year to April, which will flow through to prices. As the level of residential construction work reduces pressure on material costs and labour supply is likely to reduce further.”
In addition, CoreLogic head of research Eliza Owen said the slowdown in residential construction costs can be seen in the quarterly consumer price index (CPI) outcomes, with annual growth in the cost of new dwelling purchases declining from 20.7 per cent over the year ended September 2022 to 12.7 per cent over the year to March 2023.
“The cost of new owner-occupier dwelling purchases comprises the largest weighting in the CPI ‘basket’, which means the ongoing reduction in the CCCI is good news, potentially signalling lower inflation numbers,” she said.
[RELATED: National home prices jumped up in June]
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