bushfire australia
Along with 173 fatalities, the Black Saturday bushfires in Victoria caused 4.4 billion dollars of damage. Image – Canva.
  • Rising construction costs mean homeowners could be underinsured
  • Should a house be rebuilt, homeowners could be thousands out of pocket
  • Steps to mitigate the issue include updating property insurance value

The dark side of the housing boom may be slowly revealing itself as concerns mount about the domino effect that materials and trade shortages will have on other key sectors.

In a previous article, Master Builders Queensland Deputy CEO Paul Bidwell said the situation is dire, with concerns things could escalate later this year.

“Industry can only absorb these skyrocketing prices and delays for so long – and unfortunately, we’re predicting this situation could explode in our faces around September and October.”

Paul Bidwell, Master Builders Queensland Deputy CEO

While it is not expected builders will go insolvent en masse, one issue that could surface is housing underinsurance.

“Property owners could be left hundreds of thousands out of pocket should an
unfortunate event have them calling their insurance provider,” said MCG Quantity Surveyors‘ Director Marty Sadlier.

If a homeowner had to rebuild following a fire or natural disaster, it is possible that given the sharp rise in construction costs over the past year, “… most [homeowners] will only discover they are woefully underinsured when it’s too late.”

“Our estimates indicate the cost of building an average Aussie home in capital cities
such as Sydney, Brisbane and Melbourne has risen by over 10 per cent in the past
six months. Given the median construction cost for homes in these cities is around
$485,000 that’s a price rise of over $48,500 in half a year.” said Mr Sadlier.

Insurance payouts from the NSW flooding earlier this year totalled billions.

Rising insurance premiums for Australians living above the Tropic of Capricorn have been so significant the Federal Government announced a $10 billion reinsurance pool.

marty sadlier
MCQ Director, Marty Sadlier. Image Supplied

That’s only a general snapshot, with some areas seeing costs go up considerably more.

So if you have your house insured for $400,000 and it now costs $450,000 to build due to the rise on costs, it’s possible homeowners will be significantly out of pocket when it comes time to claim.

Mr Sadlier said underinsurance was already rife across the population but current
conditions are making this far worse.

“The Insurance Council of Australia are quoted as saying that prior to the pandemic,
83 per cent of property investors were already underinsured. But given the recent hikes in materials and labour costs, I’d be surprised if we weren’t closer to 100 per cent of owners at risk.”

In order to mitigate some of the risks, Mr Sadlier said there were three things homeowners can do:

  1. Update property insurance value regularly, at least every year,
  2. Don’t rely on online insurance calculators, but go to certified professionals who can accurately represent the replacement values of a property, and
  3. Shop around for insurance options.

~~

Before making any decisions, please do your own independent research, taking into account your own situation. This article does not purport to provide financial or insurance advice. See our Terms of Use.




You May Also Like

WA’s new medium density policy to delight urbanites but ruffle suburban feathers

Minister Saffoti said, “We need more places for people to downsize. We need more places for young people to enter into the housing market.” 

New home builds reach record rates

Despite 16.5% fall in final quarter

Boost needed for Illawarra Shoalhaven dwelling approvals

Necessary to meet future demand, says the Property Council

HIA calls for modernised building codes

Code creates barriers for prefabricated construction

Experts Corner by The Property Tribune

Ko & NPA partner to launch several co-owned luxury properties at Mermaid Beach, Gold Coast

Ko's partnership with NPA Projects provides more opportunities to co-own off-the-plan holiday residences, including exclusive Gold Coast properties

Continue reading

Top Articles

Perth property market: The definitive guide to buying a modular home

Modular homes, misunderstood as inferior, offer efficient, durable alternatives to traditional construction methods.

The 50 square metre solution getting people into their first homes and delivering an answer to ...

Small, modular homes could be a key part of the broader solution to Western Australia's current housing challenges.

The hardest time ever to buy a house in Australia: How Australian home buying got ...

We're currently in a buyer's market, but that doesn't mean Australian house prices are crashing.