CoreLogic has today released the latest Cordell Housing Index Price (CHIP) Report, which measures the rate of change in construction costs within the residential market.
Results show that the national CHIP index grew 0.6% in the June quarter. Adjusting the series for inflation shows residential construction costs increased by 0.4% over the quarter in real terms. Both the real and nominal growth results were lower than the March quarter, reflecting an easing in the growth trends across Australia’s East Coast states, where quarterly growth decelerated in the June quarter.
In the year to June 2018, the national CHIP grew 3.6%, highlighting a reduction in the pace of growth in construction costs relative to the previous quarterly annual growth rate (3.9% in the year to March 2018) and also significantly lower than the 20-year growth average of 4.5%.
The number of people employed in the construction industry also fell 1.7% in the three months to May 2018, but this decline in construction workers will not necessarily place added pressure on construction costs, because of slowing housing demand (which may in turn slow the pace of housing construction costs).
The CHIP report covers freestanding and semi-detached single and two storey dwellings, with key categories including preliminaries, brickwork, roofing insulation and roof plumbing, doors and hardware, painting and tiling, electrical services, excavation and concrete work, carpentry and joinery, windows and glazing, plastering, plumbing and drainage, and sundry appliances.
Interestingly, the national CHIP has diverged significantly in growth from CPI since 2003, when inflation has averaged 0.6%, while quarterly nominal growth in the building price index has average 1.1%.
How Construction Costs Trended Across Each of the State
NSW: 0.6% quarterly growth, 4.0% annual growth
Victoria: 0.5% quarterly growth, 3.6% annual growth
Queensland: 0.5% quarterly growth, 3.1% annual growth
South Australia: 0.7% quarterly growth, 3.7% annual growth
Western Australia: 0.7% quarterly growth, 2.6% annual growth.