The pressure on residential construction costs has subsided in Western Australia with the state recording the lowest quarterly increase across the country, according to CoreLogic.
The pressure on residential construction costs has subsided in Western Australia with the state recording the lowest quarterly increase across the country, according to CoreLogic.
CoreLogic today published its Cordell Construction Cost Index for the June quarter, which tracks the rate of change in residential construction costs.
WA recorded the lowest growth increase at 0.5 per cent in the June quarter, down from 0.9 per cent in the previous quarter.
This is the state's lowest quarterly increase since June 2019, where the index recorded a 0.4 per cent growth.
The index recorded WA with an annual growth rate of 6.9 per cent over the 12 months to June, below the naitonal rate of 8.4 per cent, and the lowest annual rise in residential construction costs since the June quarter last year.
CoreLogic’s home value index shows Perth dwelling values were up 2.8 per cent quarter-on-quarter, while dwelling values in regional WA increased by 0.9 per cent in the same period.
The home value index shows the median value of a Perth house as $615,793 while the median value of a Perth unit is $417,643, as of June 2023.
The June quarter growth is a significant deceleration compared to the growth peak of 4.7 per cent in September 2022, according to CoreLogic's Cordell Construction Cost Index.
The national Cordell Construction Cost Index increased by 8.4 per cent on an annual basis, compared to 11.9 per cent last year.
CoreLogic construction cost estimation manager John Bennett said last year’s 11.9 per cent was the biggest annual index rise on record.
Mr Bennett said while the annual growth figure remained high, it was still at the lowest level since the 12 months to December 2021.
“The latest index figures will bring some comfort and reassurance to the beleaguered building and construction industry as we’ve seen two consecutive quarters of growth more in line with long-term averages,” he said.
Mr Bennett said the CoreLogic costings team was recording some volatility and a large amount of variation across material types, but there was a softening and stabilisation in metal and timber prices overall.
“There’s been a significant drop off in dwelling approvals in the year to April, which will flow through to prices,” he said.
“As the level of residential construction work reduces pressure on material costs and labour supply is likely to reduce further.”
Mr Bennett said the industry was still facing wages pressure amid tight labour market conditions.
CoreLogic head of research Eliza Owen said the established housing market had shifted into recovery mode this year as the construction industry had slowed.
“Despite high inflation and 12 interest rate hikes in 14 months, an imbalance between supply and demand has put a floor under prices across the country,” she said.
“Unprecedented increases in rent, persistently low vacancy rates and record levels of net overseas migration is also continuing to support housing demand.
“Net overseas migration was forecast to reach 400,000 people this financial year just past, and stay elevated for the foreseeable future, which is expected to create ongoing demand for Australian housing and place renewed pressure on demand for new dwellings down the track.”
Ms Owen said the slowdown in residential construction costs was reflected in quarterly CPI outcomes, with annual growth in the cost of new dwelling purchases falling from 20.7 per cent to 12.7 per cent from September 2022 to March 2023.
“The cost of new owner occupier dwelling purchases comprises the largest weighting in the CPI ‘basket’, which means the ongoing reduction in the [Cordell Construction Cost Index] is good news, potentially signalling lower inflation numbers,” she said.
