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Housing construction costs have risen for the sixth consecutive quarter as dwelling approvals surge in response to the recently expired HomeBuilder, according to CoreLogic.
The latest Cordell Housing Index Price (CHIP) – CoreLogic’s national measure of residential construction costs – showed a 0.8 per cent increase over the three months to March 2021, making it the sixth consecutive quarter where costs have risen, albeit by 1.0 per cent or less.
CHIP measures the rate of change of construction costs within the residential market and covers freestanding and semi-detached single and two-storey dwelling homes. It covers several key categories, including brickwork, roofing insulation, doors and hardware, painting, electrical services, carpentry and more.
Annually, national construction costs rose by 3.3 per cent as the consumer price index (CPI) increased by 1.1 per cent.
According to CoreLogic’s research director, Tim Lawless, the surge in dwelling approvals as a result of the HomeBuilder grant ultimately contributed to the lift in construction costs.
“With dwelling approvals surging in response to the recently expired HomeBuilder grant, the residential construction sector is moving into what is likely to be an extended period of activity. However, we are yet to see Cordell’s measure of construction costs reflect any material increase.”
Figures from the Australian Bureau of Statistics (ABS) found that the total number of dwellings approved rose by 17.4 per cent in March, while February saw an increase of 20.1 per cent.
Meanwhile, employment in the construction industry, which accounts for around 8.9 per cent of the total workforce, fell -1.5 per cent over the three months to March 2021.
“Although construction costs rose at a slightly slower than average pace last quarter, it’s likely future quarters will record a more substantial lift in construction costs as shortages of both materials and labour add some upwards pressure on prices,” Mr Lawless said.
As a consequence, national home values have also continued to increase, with CoreLogic data pointing to a 2.8 per cent increase in March, the fastest monthly rate of appreciation since October 1988 (3.2 per cent).
Zooming in on the states, Western Australia led with the highest quarterly growth in construction costs at 0.9 per cent, followed by South Australia, Queensland and Victoria with 0.8 per cent and NSW with 0.7 per cent.
Annually, Queensland took the top spot with a 4.2 per cent increase, followed by Victoria with 3.4 per cent, Western Australia with 3.1 per cent, NSW with 2.9 per cent and South Australia with 2.8 per cent.
Of the major states, Queensland currently has the highest CHIP index at 325.2, followed by NSW with 305.1, Western Australia with 298.8, Victoria with 294.3 and South Australia with 279.3.