The increasing cost of building a home is a growing concern for many Australians, with construction costs rising at a rapid pace. According to data, national construction costs increased 7.3% in 2021, which is the highest annual growth rate since March 2005. Unfortunately, this trend is expected to continue due to supply chain disruptions, which are causing delays and shortages of building materials.
The primary driver of cost increases in the residential construction industry is timber, especially structural timber. While timber is primarily produced domestically, excess demand, such as in a boom year like 2022, is largely sourced from overseas markets. This has led to the value of select wood imports reaching their highest level on record in the final quarter of 2021, according to Housing Industry Association (HIA) economist Thomas Devitt.
In addition to timber, other segments of the market are also volatile, with metal costs increasing. As a result, some building materials may be in short supply, leading to delays or cost overruns for residential projects. Despite this, building approvals for detached housing reached record highs in 2021, with 150,000 approvals, indicating that demand for new homes is unlikely to slow down anytime soon.
The rising construction costs have implications for current homeowners as well, as higher costs can make it harder for them to upgrade their properties. This is likely to add to affordability challenges in the established housing market. Furthermore, higher building costs may require homeowners and property investors to review their insurance cover. It’s important to keep track of sum insured and annually check that it is sufficient should the worst occur, according to CoreLogic Head of Insurance Solutions Matthew Walker.
To address these challenges, it’s crucial to work with a professional when looking for a construction loan. Professionals can help secure a great rate and provide flexible loan options to cater to unforeseen contingencies. In conclusion, homeowners and builders alike should be aware of the rising construction costs and take appropriate steps to mitigate their impact.
Look out for new information as it comes to hand. Kelvin
