Construction Costs Surge, Pushing Property Prices to Record Highs in Australia
Australia: The rapid rise in construction costs in Australia, which appeared to be slowing, has surged again, driving property prices to unprecedented heights. While the national rate of growth in construction costs had slowed to 3.9% by September 2023, certain regions are experiencing significant accelerations. South Australia recorded a 7.3% year-on-year increase in the June quarter, up from 6.4% in March. Western Australia stands out with a dramatic 18.9% rise over the same period, approaching pandemic-level increases.
Labor shortages, particularly in finishing trades, and strong union activity, which has prompted a Senate inquiry, are major factors driving up costs. Despite reductions in the prices of some materials like timber and steel, others such as bricks, plaster, concrete, and copper pipes continue to rise. Copper's increased demand for green energy and electric vehicles is further inflating costs.
The soaring construction costs have led to fewer new homes being built, significantly driving up prices for existing properties, with Perth experiencing a 25% rise in house prices over the past year. While commercial property hasn't seen the same price growth, rising construction costs are expected to support higher prices in the short to medium term, even in the office sector, which has been most affected by the current downturn.
Source: Elite Agent
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