Monday 14 August 2023

House construction cost inputs +33pc

Construction cost explosion

House construction cost inputs have increased by 33 per cent since the onset of the pandemic, according to the ABS Producer Price Indexes figures. 

Thankfully the increase now appears to be slowing.

But, as the graph below shows, costs have simply exploded since the beginning of 2020.

Of course, costs do generally rise steadily over time - partly because homes are better appointed than they use to be - but there's never been a period quite like this over recent decades.

House construction cost inputs are now 16x higher than in June 1971. 


The surge in costs was caused by a combination of the HomeBuilder stimulus package and chronic supply constraints caused by border closures and protracted lockdowns. 

The highest number of developers in a decade has been sent insolvent over the past financial year, as cost overruns on fixed price contracts crippled builders operating on often thin margins.

As such, housing supply is not keeping pace with record high housing demand, in spite of the elevated number of dwellings approved for construction and in the pipeline.

It's hard to see apartment development picking up significantly until the price of new apartments rises by at least a third. 

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Greens rent freeze

The rental supply also won't be helped by further government meddling, this time in the form of proposed rent and rates controls.



It's hard to know where to start with this nonsense, except to say that it's unlikely to be enacted (it probably wouldn't pass the High Court), although rent controls could be introduced at the state level by some states...notably including Victoria. 

Of course, even the proposing of such interventions will only serve to further stymy supply as investor confidence deteriorates.

And as soon as you begin to think of the practicalities of the proposals they all falls to crap anyway.


Oh, and then there's this...


The Greens seemingly haven't progressed to year 9 economics yet, and seem to be periodically hell-bent on proposed policies more fit for Venezuela. 


Ho hum...