Construction costs continue to rise sharply, but the worst is behind us as it appears to be slowing down.
Residential construction costs rose 11.9% during 2022, after climbing 7.3% in 2021, according to CoreLogic’s Cordell Construction Cost Index (CCCI).
The 2022 result was the largest annual increase on record, apart from the period impacted by the introduction of the GST.
However, the pace of growth appears to be slowing: prices increased 4.7% in the September quarter, but only 1.9% in the December quarter.
This is good news for investors who are planning to start the construction of their rental properties early this year. Two major factors that make it favorable to investors are:
- The price of building materials have softened
- Rent income rose significantly during 2022 and is forecasted to continue to rise in 2023
CoreLogic construction cost estimation manager John Bennett said, in 2023, costs would be unlikely to rise at the same rapid pace as in the recent past. This is because rising interest rates and inflation have made consumers, builders and suppliers more cautious.
Analyzing the price increases, Mr Bennett said:
- Volatile timber prices are affecting the cost of structural timber and general timber products.
- Prices continue to increase for metal products, such as gutters, lintels and fixings, which are used for roofing and structural purposes.
- Petrol price increases are affecting cartage and delivery costs, including for concrete and rainwater tanks.
- Gravel, aggregates and fill prices have increased, possibly affected by the rise in petrol prices.
- Costs have also increased for appliances and fittings.
With the slowing down of the rise of construction costs, it is worth looking into seeking funding for your construction project now. Contact us to discuss your goals and objectives.