Why new home build costs have gone through the roof
The price of raw materials such as timber and metal rocketed home construction costs in the September quarter. The Master Builders Association says new build costs have jumped 44 per cent in the past six years.
THE cost of building a new house has gotten more expensive, with the price of home building materials rising 0.8 per cent during the September quarter.
The Producer Price Index (PPI) released by the Australian Bureau of Statistics covers input costs for a range of industries, including housing construction.
The increase in the cost of raw materials including timber and metals contributed to the 0.8% rise.
Over the past 12 months, input prices to house construction – or the cost of building materials needed to construct houses – jumped 2.1%.
“Timber products experienced notable price increases, primarily due to suppliers passing on higher raw material costs to buyers,” the ABS noted.
“Other metals products also rose due to raw material cost increases, particularly in aluminum and copper.”
Other materials including plaster products, floor coverings, paint and insulation also increased, mainly due to annual supplier price adjustments reflecting increased input costs.
However, the rises were offset by price falls in concrete, cement and sand as some suppliers cut prices amid increased competition.
Meanwhile, labour cost increases due to sustained skilled labour supply challenges continue to impact prices across the construction industry, the ABS noted.
The cost of building a new house rose this quarter by 1.2%, and over the year, by 0.5%.
“It is now 44.8 per cent more expensive to build a new house than it was just before the pandemic,” Master Builders Australia chief economist Shane Garrett said.
“The acceleration in new house building costs is partly down to more expensive building materials,” Mr Garrett said.
“Most types of house building materials are more expensive than a year ago.
“Concrete, cement and sand products suffered the largest cost increases (+5.0 per cent) over the past year.
“Cement product prices were up by 3.2 per cent over the past year. However, the same period saw steel costs decline by 4.6 per cent.”
He argued the increased costs were pushing more projects out of reach.
“The deterioration in house building costs hurts the viability of new home building projects,” Mr Garrett added.
