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Growth in residential construction costs expected to slow in 2023

22/2/2023

Home building costs continue to rise sharply, but it appears the worst is behind us.

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.

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, because rising interest rates and inflation have made consumers, builders and suppliers more cautious.

Analysing 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

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Rents rise from 4.3% in Canberra to 13.4% in Brisbane

15/2/2023

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Many property investors enjoyed a big rise in their rental income during 2022.

CoreLogic has reported that the median rent for an Australia investment property increased 10.2% during the year. The city-by-city breakdown was:

Brisbane 13.4%
Adelaide 12.9%
Sydney 11.4%
Perth 11.2%
Melbourne 9.6%
Hobart 5.3%
Darwin 5.1%
Canberra 4.3%

During 2022, the national vacancy rate fell from 2.1% to 1.2%. To put it another way, the number of untenanted rental properties fell from 21 per 1000 to a very low 12. That forced tenants to compete harder, pushing up rents.

"Rents are still rising in most capital cities and regional areas, with vacancy rates low," according to CoreLogic head of research Eliza Owen.

Between September 2020 (when this period of rental increases began) and December 2022, Australian rental rates increased 22.2% – the largest increase in a 27-month period in recorded history

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Growth in residential construction costs expected to slow in 2023

Rents rise from 4.3% in Canberra to 13.4% in Brisbane

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