Construction costs hurdle jumps
Travelling today, so I'll just drop in a couple of Tweets and a graph from top analyst Cameron Kusher of REA Group.
The average construction cost for apartments in Australia has exploded by an extraordinary +73 per cent since March 2020, according to the latest analysis, to over $600,000 per unit.
Costs are up for the construction of houses, too, albeit not quite so dramatically.
Given higher mortgage rates, it's not too hard to see why so many developers are sitting it out (the developers that haven't already fallen into insolvency), except for premium-priced apartment projects.
As Cameron notes, despite the shortage of housing, developers need to see higher prices to make projects feasible.
Unit prices in some cities - Brisbane, Adelaide, Perth - have already been adjusting upwards over the past few years.
But in Melbourne and Sydney, established unit prices are not much changed since around 2018.
Victoria is tackling the housing shortage challenge comparatively more successfully than Sydney, with more construction on the city fringe, build to rent projects being approved, and with the stamp duty exemptions fuelling a jump in new apartment sales.
In Sydney, though, the shortage looks set to become quite dramatic over the next few years, and established units in the supply-constrained markets are faring relatively well.
The Housing Industry Association reported a -10.1 per cent decline in new home sales in November, with new housing supply New South Wales really struggling.
