National construction costs increased 7.3% throughout 2021, the highest annual growth rate in nearly 17 years, which will 'impact all homeowners and investors'.
Despite an easing in the quarterly rate of growth in the second half of 2021, national construction costs had the highest annual growth rate since March 2005.
Over the three months to September 2021, construction costs surged 3.8% but then softened to 1.1% in the December quarter.
This most recent result brought the quarterly trend back in line with the five-year average of 1.3%, which is also below the Consumer Price Index (CPI) for the same period.
Rising construction costs are in lieu of property price growth at 22.4% through the year.
CoreLogic Research Director Tim Lawless said growth in residential construction costs is still expected to remain 'above average' over the coming quarter due to supply chain disruptions.
"There is a significant amount of residential construction work in the pipeline that has been approved but not yet completed," Mr Lawless said.
"With some materials such as timber and metal products reportedly remaining in short supply, there is the possibility some residential projects will be delayed or run over budget."
The median price of land also increased by 12.6% over the year to September 2021, with a recent report from HIA-CoreLogic pointing out that the 'significant' increase in the price of land indicates supply isn't keeping up with demand.
"With such a large rise in construction costs over the year, we could see this translating into more expensive new homes and bigger renovation costs, ultimately placing additional upwards pressure on inflation," Mr Lawless said.
CoreLogic Head of Insurance Solutions Matthew Walker said rising construction costs don't just impact renovators, builders and businesses, but all homeowners and property investors.
"In these times of rapidly rising home and construction costs, under insurance can quickly become a real threat to what is a most valuable asset," Mr Walker said.
"It’s important that home owners keep track of their sum insured and annually check that it is sufficient should the worst occur by using their insurer’s rebuild calculator or giving them a call."
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Lender | |||||||||||||
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| Variable | More details | ||||||||||||
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Green Construction Home Loan (Interest Only)
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| Variable | More details | ||||||||||||
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Basic Investment Loan (Principal and Interest) (LVR < 60%)
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| Variable | More details | ||||||||||||
| 100% FULL OFFSET ACCOUNT | |||||||||||||
Offset Package Home Loan (Principal and Interest) (LVR < 60%) | |||||||||||||
| Variable | More details | ||||||||||||
| 100% FULL OFFSET ACCOUNT | |||||||||||||
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| Variable | More details | ||||||||||||
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Yard Investment Loan (Principal and Interest) (LVR < 80%) | |||||||||||||
| Variable | More details | ||||||||||||
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Basic Home Loan (Principal and Interest) (LVR 70%-80%) | |||||||||||||
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Yard Investment Loan (Principal and Interest) (LVR > 80%) | |||||||||||||
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Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 26, 2022. View disclaimer.
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