The Cost To Build

Data released by the Australian Bureau of Statistics on Wednesday shows that the cost of building a new home has surged almost 40 per cent over the past four years, which is threatening the Albanese government’s efforts to build 1.2 million homes and keeping upward pressure on interest rates. From this, inflation in the housing market remained a major source of upward pressure on the consumer price index in May, according to data. The May rate unexpectedly rose to 4% ruling out lower interest rates in the near term. After steadily falling from mid-2022 to mid-2023, inflation in the cost of building a new home has become entrenched at 5 per cent, due in part to a substantial pipeline of state government infrastructure projects putting upward pressure on building material and labour costs.

Building costs have increased 37 per cent cumulatively since the onset of the COVID pandemic and are a major driver of high inflation. Materials had gone up 25 to 40 per cent over the past few years. The effects of this are being borne out in the local property market with buyers pricing in a big discount on how much they are willing to offer for unrenovated homes as renovation and rebuild costs continue rise.