How much does it cost to build a house in 2022?

How much does it cost to build a house in 2022?

The latest Australian Bureau of Statistics data revealed that the average house costs approximately $320,000 to build.  However, the “real world” figure depends on a number of factors.

From where the house is located, to the size and cost of the block its built on, to the finishes selected and even the impact of COVID, there’s lots to consider. Let’s break it down.

There are a number of issues that have arisen in the post-COVID landscape that builders are now facing.

Increasing Constructions costs

A surge in new builds and renovations coupled with supply chain disruptions and a shortage of materials has resulted in an unprecedented spike in construction costs.

CoreLogic’s quarterly measure of residential construction costs reveals a national increase of 3.8% was recorded in the three months to September 2021, outpacing the Consumer Price Index of 0.8% for the same period.

The Cordell Construction Cost Index (CCCI), formerly known as the Cordell Housing Index Price (CHIP), shows this is the largest quarterly increase since Q3 2000, when construction costs increased 7.2% after the introduction of the GST. Nationally the annual CCCI increase was 7.1%, the highest yearly growth rate since March 2005.

Global supply chain issues are affecting construction in Australia

COVID-19 has changed the landscape for the building profession in a variety of ways, from supply chain and productivity issues to border restrictions, so project completions have been slower and more expensive on average during the pandemic.

Tradie Shortage

Worker shortages are causing even further delays on projects amid the renovation 'boom' caused by Australians spending more time at home due to the global pandemic.  Australians have been spending record amounts on renovations, as COVID lockdowns have driven an ongoing reassessment of lifestyle wants and housing needs.

According to the latest Australian Bureau of Statistics data released in January, renovation loans rose by 18.3% in November to a record $569 million in November. That was an 115% jump in the value of lending for renovations compared to a year earlier.

Summary

The jump in construction costs comes at a time when CoreLogic is reporting a 20.3% rise in housing values nationally over the past year. Higher construction costs are likely to add to affordability challenges already at play across the established housing market.

“There’s already evidence that the cost of new housing and residential construction is placing upward pressure on Australia’s inflation rates and these figures will only add to that pressure,” Mr Lawless said.

Key findings – Q3 2021 CCCI Report

  • The New South Wales CCCI increased 3.8% in the September quarter compared to the 1.3% increase recorded in the three months to June 2021. The state’s annual growth rate of 6.6% is the highest on record.
  • Victoria recorded the lowest quarterly increase of all five states, up 3.5% in the three months to September. However, it is the largest quarterly growth Victoria has recorded since the GST was introduced in 2000. Victoria’s annual construction cost growth rate is 6.8%.
  • Queensland’s CCCI increased 3.8% during the September quarter, taking its annual increase to 8.0%, the highest in Australia. It is Queensland’s most significant annual rise in residential construction costs on record.
  • The CCCI for Western Australia increased 4.3% for the quarter, up significantly on its June quarterly growth rate of 1.4% and the fastest pace of growth in construction costs since the GST was introduced in 2000.
  • South Australia recorded the highest quarterly increase in the CCCI across the five largest states, up 4.4% in the three months to September, taking its annual growth rate to 7.5%.