- Steel prices down by 10%.
- Total building costs still climbing, albeit at a slower pace.
- Prices of newly built homes and infrastructure have yet to stabilise.
Master Builders Australia’s analysis of ABS Producer Price Indexes found that steel prices have plummeted by 10% in the year to June 2023, the lowest it has been in nearly three years. It is welcome news, giving home buyers some respite in an era typified by multiple interest rate hikes, soaring rents, low building approvals and a still unaddressed housing shortage.
The comments from Master Builders Australia come after a similar report from CoreLogic, which found that home-building costs recorded their smallest increase since September 2020, potentially signalling that the spiralling prices are finally slowing down.
Labour shortage unaddressed, other building material prices still rising
Though the news may present a glimmer of hope for the industry mired in an insolvency crisis, Master Builders Australia chief economist, Shane Garrett, warns that the future of construction remains uncertain as building costs continue to climb due to the rising inflation of other building materials and labour shortages.
“During the June 2023 quarter, the cost of building materials increased by another 0.6%, the smallest quarterly increase since the end of 2020,” said Garrett.
“While the slowdown in the overall cost of home building materials is welcome, there has still been a sizeable increase of 7.4% over the past 12 months.
“The past year has seen sizeable drops in the cost of several crucial building materials. The 10.0% drop in steel product prices over the past year was the most significant change, with a welcome reduction of 4.4% in the cost of structural timber also occurring.
“Steel and timber were the source of the biggest cost headaches over recent years – the fact that prices here are now in reverse is something of a relief.”
Shane Garrett, Master Builders Australia
“However, the outlook is bumpy as even though the general trend in building materials prices is a favourable one, there has been a worrying acceleration in the cost of concrete, cement and sand products, a category where prices are now 16.2% higher than a year ago.
“Total building construction prices rose 1.0% in the June quarter and 6.5% over the past twelve months predominately driven by labour shortages.”
Prices of new builds are likely to still be high
Master Builders Australia CEO, Denita Wawn, says that the jump in construction costs in the recent past has been detrimental to the cost of newly constructed dwellings and infrastructure in Australia.
“Latest inflation figures show that new dwelling costs rose by 7.8% over the past year, exacerbating the housing affordability crisis,” said Wawn.
“The rental market has also been hit hard by the surge in new home building costs. During the June 2023 quarter, rental inflation hit its fastest pace since 1988.
“With building and construction costs skyrocketing since the pandemic, it is important that government policies prioritise productivity improvements, reduce supply constraints and maintain flexibility.
“The Federal Government’s proposed industrial relations reforms will have damaging
consequences for the industry and further impact the increasing costs of construction.”