Building costs set to soar

The COVID-19 pandemic has seen Australians deal with a whole bunch of issues from health concerns through to lockdowns and border closures.

Now it seems COVID could have another unwanted side effect – rising construction costs. And no matter whether you’re planning to add a patio to the backyard or build a brand new home, chances are you could be impacted.

Tradies in short supply

The Housing Industry Association (HIA) says the shortage of skilled tradespeople is “the most significant shortage on record”¹.

HIA Economist Angela Lillicrap, says, “All trades recorded a deterioration in availability during the December 2021 quarter. Bricklaying, carpentry, joinery, roofing, general building and other trades have reported the most severe shortages on record.”

She explains the shortage is due to a boom in detached house construction and renovations, which has “seen demand for land, labour and materials skyrocket”.

The result, according to the HIA, is that construction timeframes are being pushed out.

And there may be no immediate relief in sight. Skilled trades are expected to be in high demand throughout 2022 and into 2023.

Construction costs rise 7.3%

The challenge facing home builders and anyone planning even a minor home improvement, goes beyond a tight supply of chippies, brickies and sparkies.

The latest Cordell Construction Cost Index² shows construction costs nationally increased 7.3% last year, the highest annual hike since March 2005.

The cost spike is being driven by increased demand plus pandemic-related supply chain disruptions leading to a severe shortage of materials³. 

Be prepared

Rising building costs coupled with a shortage of tradies could impact your building project. That doesn’t mean you should scrap plans, but it does pay to be prepared:

• Before signing a building contract, check how the builder can pass on any cost blow-outs.
• Speak to your builder about realistic construction timeframes.
• For DIY projects, allow room in your budget for unexpected cost increases.

Importantly, talk to your Mortgage Choice broker about finance options to pay for a new build or renovations.

If you’re planning a brand new home, a construction loan can be a suitable form of funding. If you’re giving your place a makeover, it may be possible to draw on the home equity you’ve built up through a loan top up or refinancing – it can be a way of preserving personal savings.

The main point is to head into any sort of building project with your eyes wide open. Speak to your Mortgage Choice broker to know the finance options available to get started on your project.