National residential construction costs have skyrocketed by 10 per cent over the past 12 months, according to CoreLogic’s latest Cordell Construction Cost Index.

The increase is the largest on record, apart from the introduction of the GST in the year to March 2001, which hit 10.2 per cent.

CoreLogic construction cost estimation manager, John Bennett, said the prices of metal, structural steel, reinforcing, fixings, and fencing are rising, adding to the increasing prices of timber products.

“Suppliers are frequently mentioning the impact of rising fuel, freight, and electricity costs on their bottom line and these are significant additional challenges being faced by the industry,” he said.

“It is important to note these factors only add to other pressures that have impacted the residential construction industry for 18 months now, such as labour availability and overheads.

“A shortage of labour and materials means a delay in completion times, which leaves builders vulnerable to market changes and holding costs.”

CoreLogic research director, Tim Lawless, said the double-digit increase was expected.  

“Construction cost growth is an additional concern to an industry already under immense workload pressures as well as economic conditions, such as rising interest rates and inflationary pressures,” he said.

“Construction costs have increased more than 25 per cent over the past five years, which has a knock-on effect to builders’ margins, budget blowouts for customers not on fixed price contracts, and homeowners waiting for their projects to finish or even start in many cases.

“It’s also impacting the insurance industry, as homeowners struggle to reassess existing policies to make sure they are adequately covered in the event they need to make a claim.”

Mr Lawless said that along with the soaring construction costs, the industry will remain challenged by ongoing labour shortages and supply issues.

“The pipeline of construction approved during COVID-19 is still being worked through and there’s been a number of major weather events as recently as this month, which require significant rebuild and repair work,” he said.

“This all adds additional demand-side pressure for construction materials and trades. There’s also no reprieve on the supply side either with lack of materials, elevated fuel costs and broader inflationary pressures.

“All of these factors have an impact and are likely to push building costs higher for some time yet.”

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