The cost of building a home has risen by its slowest quarterly pace in a year, climbing by only 1.9% nationwide over the December 2022 Quarter. It is likely to slow further in the next 12 months due to falling demand.
This is welcome news as residential construction costs surged by a record 12% over the past 12 months, according to the Cordell Construction Cost Index.
Tim Lawless of CoreLogic Research said the slowdown in construction costs should help cool inflation this year. The housing component of the CPI, which includes both home building costs and rents, has been one of the main contributors to high inflation recently.
Dwelling approval figures have dropped by 41% since moving through historic highs in March 2021, and this also should help reduce pressure on the industry, Lawless said.
Although there is still a substantial pipeline of residential construction work to be completed, the declining number of approved homes should help to alleviate construction costs.
Anecdotally, as skilled migration continues to increase, the costs associated with some trades and labour should slow further.
The easing in construction costs could boost builder confidence, but is unlikely to spark another renovation or building boom, says Mark Bainey of Capio Property Group.