According to Cotality’s latest Cordell Construction Cost Index (CCCI), the quarterly growth represents a slight uptick from the 0.5 per cent and 0.4 per cent increases seen in the previous two quarters, while annual growth has slowed to 2.5 per cent over the 12 months to September.
Cotality Head of Research, Eliza Owen, said the rate of cost increases has fallen significantly since the pandemic period.
“Over the past two years, the annual growth in home building costs has remained below the pre-COVID decade average of 4 per cent,” Ms Owen said.
“While underlying construction costs remain high, the rate of annual increases has not been this low since March 2002.”
Western Australia has emerged as an exception to the national trend, recording the highest quarterly increase at 1.3 per cent, nearly double the 0.7 per cent rise in the previous quarter.
This has pushed annual cost increases in the state to 3.6 per cent, up from 2.8 per cent in the year to September 2024.
The September quarter saw widespread increases across building materials, with metal and associated products leading the rise in costs.
Structural timber remained relatively stable with only minor increases affecting select items.
Cotality Construction Cost Estimation Manager, John Bennett, said that some materials actually saw price reductions in certain regions.
“Plasterboard and plaster products experienced price declines, particularly in South Australia and Western Australia. At the same time, the new financial year has prompted price updates from many vendors, adding to cost pressures,” Mr Bennett said.
Labour costs also increased during the September quarter, driven partly by rising dwelling approvals and ongoing competition for skilled trades.
Nationally, dwelling approvals rose 4.3 per cent over the three months to August, compared to the previous quarter ending in May.
The construction industry continues to face significant challenges despite the slowing rate of cost increases.
The cumulative impact of price rises since the pandemic began has created ongoing pressure on project viability.
“The nearly 40 per cent rise in cumulative costs since the pandemic continues to place sustained pressure on liquidity and project feasibility,” Mr Bennett said.
He also highlighted that workforce issues remain a significant concern for the sector.
“Meanwhile, the ongoing shortage of skilled trades remains a persistent challenge of the industry. This quarter’s labour cost increases also reflect the impact of annual enterprise wage agreements coming into effect.”
