Residz Team 3 min read
Building costs and delays are fast becoming the subjects of “office water cooler” chat (not that many of us stand around water coolers in 2022!) Covid-19 lockdowns and isolation periods made building a deck or adding another storey to your house stressful undertakings in 2021. But now the lockdowns are over, updating a ‘renovator’s delight’ is causing angst due to eye-boggling costs.
New data shows construction expenses have risen 25% over the past 5 years, with rises of just under 10% in the past year alone.
CoreLogic’s latest research on the costs of construction show a record-breaking rise in the cost of materials, whether it’s structural steel, timber decking, or metal fixtures and fittings.
If you can’t remember a time like this, you’d be right. The company’s Cordell Construction Cost Index (CCCI) shows national residential construction costs increased 9% over the 12 months to March 2022, the highest annual growth rate on record (outside of the introduction of the GST).
South Australia saw both the highest quarterly growth and the highest annual growth in construction costs at 2.5% and 9.8% respectively. This means a renovation in that state costing $100,000 in March 2021 now costs just under $110,000.
It comes as Adelaide’s property market value rose by a record 23.9 per cent last year, according to the Australian Bureau of Statistics. While you can still buy a dwelling in Adelaide or WA for a relatively affordable price, the average home price is now in the $600,000s, a lot for most wage-earners.
Other capital cities now have home prices that average well above $900,000. You won’t get much for these prices and that’s the dilemma facing home buyers and sellers. No matter where you choose to live, it’s now costly to buy, sell, or renovate.
Selling a home costs a considerable amount of money. According to ANZ, expect to pay agents’ fees of 1.5%-4.5% of your property’s value ($7,500-$22,500 on a $500,000 home) plus property styling, minor repairs, auctioneer costs, advertising, and conveyancing fees. On top of this, you pay stamp duty of between $40,000 and $50,000 on a $1 million home.
It could be even costlier, given you have to try harder to outcompete the increased number of houses on the market. According to CoreLogic, the total number of homes for sale rose by 10% in Sydney and 5% in Melbourne in the year to March 2022. Attracting buyers with more advertising, better styling, improved landscaping, or street appeal upgrades will add to the costs.
With interest rates rising and capital city home prices cooling you’d be forgiven for choosing to stay put and renovate once building costs come back down. However, CoreLogic Research Director Tim Lawless says construction costs are likely to stay high.
“Considering the record number of houses approved for construction during the HomeBuilder grant along with additional rebuild and repair work from the recent floods, demand for construction materials is likely to remain high,” he says in his April 2022 research release.
He adds shortages of key materials such as structural timbers and metal products, along with higher fuel costs and labour shortages, are likely to keep upwards pressure on building costs “for some time yet.”
So many of us are going to feel stuck in a place that’s not quite right. And, if we can’t shift home, we can do well to shift our mental attitude. In the words of comedian Groucho Marx:
“Each morning when I open my eyes, I say to myself: I, not events, have the power to make me happy or unhappy today. I can choose which it shall be. Yesterday is dead, tomorrow hasn’t arrived yet. I have just one day, today, and I’m going to be happy in it.”
Image: Light Steel Framing. Photo by Steelman.