Australian residential construction costs increased by 3.4% over the 12 months to December 2024, according to CoreLogic's latest Cordell Construction Cost Index (CCCI).
The reading marks the sharpest annual rise in costs since the 4.0% increase recorded in the year to September 2023.
The pace of quarterly construction cost growth, which had eased below 1.0% during 2023 and early 2024, returned to the pre-COVID decade average of 1.0% in the latter half of 2024, contributing to the upward trend in annual costs.
CoreLogic Economist Kaytlin Ezzy noted that the increase poses significant challenges to an already-struggling industry.
"Residential construction companies continue to face profitability challenges with the CCCI up 30.8% since the onset of COVID," Ezzy said. "Outside of compressed margins and continued labour challenges, the construction industry is also facing a looming shrinkage in the construction pipeline."
Building commencements have declined, with Australian Bureau of Statistics (ABS) data showing new dwelling commencements near 10-year lows for the year to June 2024.
"These factors combined have contributed to an increasing number of liquidations, with 2,832 construction companies becoming insolvent in the 2023-2024 Financial Year, representing the greatest proportion of company collapses," Ezzy added.
John Bennett, CoreLogic’s Construction Cost Estimation Manager, highlighted variances in the costs of specific building components during the quarter.
"It was a bit of a mixed bag this quarter, with increases and decreases across different categories. What is constant is that labour continues to be a key driver of cost increases," Bennett said.
For instance, concrete blocks experienced a 15% decline on average, while plumbing PEX fittings and pipework rose by 5%. "We're not seeing any dramatic movements one way or another," he added.
Queensland led the nation with the highest quarterly construction cost increase at 1.2%. New South Wales, Victoria, and Western Australia saw costs rise by 1.0%, matching the national average, while South Australia recorded the smallest increase at 0.9%.
