CoreLogic’s national measure of residential construction costs rose by 0.8% over the three months to March 2021, making it the sixth consecutive quarter where costs have risen by 1.0% or less.
The Cordell Housing Index Price (CHIP) measures the rate of change of construction costs within the residential market and covers freestanding and semi-detached single and two storey dwellings.
The first index for 2021 showed national residential construction costs rose 3.3% annually. Meanwhile, figures show the consumer price index (CPI) increased by 1.1% over the year to March 2021.
According to seasonally adjusted ABS figures, the total number of dwellings approved rose by 17.4% in March after February saw the total number of dwellings approved surge by 20.1%. Employment in the construction industry, which accounts for around 8.9% of the total workforce, fell -1.5% over the three months to March 2021.
CoreLogic’s national home value index saw Australian home values increase by 2.8% in March, the fastest rate of appreciation since October 1988 (3.2%). It was noted that these exceptionally strong growth conditions remain broad-based, with values rising by at least 1.4% across each of the capital cities and ‘rest-of-state’ areas over the month.
Tim Lawless, research director at CoreLogic, says “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.
“Construction costs were up 0.8% over the March quarter, slightly below the decade average rate of growth and with little in the way of variation across the states.
“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,” says Mr Lawless.
Key findings – Q1 2021 CHIP Report
- The New South Wales CHIP index remained flat quarter on quarter, with 0.7% growth in the first three months of the year, bringing annual growth slightly lower to 2.9%.
- Victoria’s CHIP index grew 0.8% over the March quarter, slightly up on the 0.6% growth over the previous quarter. Annual growth was 3.4%, slightly higher than the national growth rate.
- Queensland’s quarterly CHIP index growth dropped from 1.8% in the three months to December to 0.8% in the three months to March, bringing it back in line with the national growth rate.
- South Australia’s CHIP index increased by 0.8% over the March quarter. Annual growth remained the lowest of all states at 2.8%.
- The CHIP index for Western Australia rose by 0.9% over the March quarter.