Just like property prices, building costs are soaring

Just like property prices, building costs are soaring

Recent data released in the latest Domain House Price Report shows that Sydney house prices rose on average more than $100,000 in the first three months of this year, making it the fastest quarterly growth since records began in 1993. But it’s not just house prices across the country that are...

Recent data released in the latest Domain House Price Report shows that Sydney house prices rose on average more than $100,000 in the first three months of this year, making it the fastest quarterly growth since records began in 1993.

But it’s not just house prices across the country that are climbing at an unprecedented rate – home building costs are simultaneously soaring.

Propelled by the Government’s Home Builder Grant, the demand for labour and construction materials currently far outweighs the available supply. The $25,000.00 grants, combined with record low interest rates and a shortage of both tradespeople and building materials has created the perfect storm for accelerated building costs.

Those footing the bill? Anyone looking to renovate or build in next twelve to twenty-four months.

Undeniably, the foundation from which the costs have skyrocketed is the Home Builder scheme which provides eligible owner-occupiers (including first home buyers) with a grant to build a new home, substantially renovate an existing home or buy an off the plan home or new home.

Applications for the Home Builder scheme closed just weeks ago. With close to 100,000 applicants it’s safe to say that the grants proved far more popular than the Government initially anticipated.

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In line with the conditions of the $25,000.00 grant, home owners have just six months from the point of being approved on the grant to sign a contract with a licensed builder and commence work on construction. If they can’t meet this deadline their only option is to forfeit the grant.

A looming deadline for thousands of homeowners ready to start construction has resulted in builders struggling to find subcontractors and materials while local governments are snowed under with development applications.

According to the Housing Industry Australia (HIA), new house approvals are growing at the strongest rate in twenty years of records. Builders across the country are unsurprisingly the busiest they have ever been – some reportedly booked up for the next two years.

With not enough trades or materials to keep up with demand, many hopeful to build or renovate will have to not only be patient with timelines, but pay a premium. As with any marketplace – when demand outweighs supply – prices inevitably rise.

Builders have had to absorb the increased costs of materials and labour and ultimately need to pass these onto homeowners. It is expected that inventory of construction materials will slowly begin to improve as import levels adjust, but for now, blown out timeframes and inflated costs is the reality for many.

This sharp increase in demand for building supplies has not only been felt on our shores – but globally as more people across the world decided that a backdrop of a pandemic was the perfect time to renovate or build.

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