CoreLogic’s Cordell Housing Index Price (CHIP) – which measures the rate of change of construction costs within the residential market and covers freestanding and semi-detached single and two-storey dwellings – has revealed that national residential construction costs rose by 3.3 per cent annually and 0.8 per cent over the three months to March 2021.
According to CoreLogic, this is the sixth consecutive quarter where costs have risen by 1.0 per cent or less.
It also noted that the consumer price index (CPI) increased by 0.9 per cent over the December 2020 quarter, compared to 1.6 per cent over the September 2020 quarter.
CoreLogic’s national home value index showed that national home values increased by 2.8 per cent in March, representing the fastest rate of appreciation since October 1922 when values increased by 3.2 per cent.
The growth in values remained broad-based, rising by at least 1.4 per cent across every capital city and rest-of-state areas over March, according to the index.
CoreLogic research director Tim Lawless said the March quarter rise in construction costs was slightly below the decade average rate of growth, while there was little variation across the states.
Construction costs were up by 0.7 per cent over the March 2021 quarter, and 2.9 per cent over the higher to March 2021, compared with 3.6 per cent in the year to March 2020.
Sydney dwelling values were up 6.7 per cent over the March quarter and up 5.4 per cent over the 12 months to March 2021, while regional NSW recorded a 6.6 per cent quarterly increase and a 13.6 per cent annual increase.
Victoria’s construction costs grew by 0.8 per cent over the March 2021 quarterly (in line with the national quarterly increase) and by 3.4 per cent annually, according to the construction index.
Melbourne’s dwelling values increased by 4.9 per cent over the March quarter, compared with a quarterly 7.0 per cent rise across regional Victoria, CoreLogic’s home value indices revealed.
Queensland recorded the highest annual change in construction costs, with the index rising by 4.2 per cent in the year to March 2021, while the state recorded a quarterly growth rate of 0.8 per cent (down from a 1.8 per cent increase in the previous quarter, which is the highest quarterly increase since the September 2012 quarter).
Brisbane dwelling values rose by 4.8 per cent over the March quarter and 6.8 per cent annually, while regional Queensland recorded a 5.8 per cent quarterly increase and an annual 10.8 per cent increase, according to CoreLogic’s home value index.
South Australia’s construction costs also increased by 0.8 per cent over the quarter (in line with national growth rates), but the state recorded the lowest annual growth of all states, increasing by 2.8 per cent year-on-year, CoreLogic data showed.
The CoreLogic home value index showed that Adelaide dwelling values jumped by 3.2 per cent over the March quarter, while regional South Australia dwelling values rose by 5.9 per cent over the same period.
In Western Australia, construction costs rose by 0.9 per cent quarterly (up from a 0.7 per cent growth rate in the previous quarter) and 3.1 per cent annually, according to the figures.
The CoreLogic home value index showed that Perth’s dwelling values rose by 5.0 per cent over the three months to March, while dwelling values in regional Western Australia rose by 4.8 per cent over the same period.
Future construction costs could lift more: CoreLogic
Commenting on the figures, Mr Lawless said: “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.”
He added: “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.”
Australian Bureau of Statistics data for March showed that the value of total buildings approved rose by 36.3 per cent over March to $15.6 billion (a record high), driven by a 59.4 per cent rise in the value of non-residential building to a record-high $6.7 billion.
Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.