Construction costs stabilize as dwelling approvals hit 12-year low, CoreLogic report finds
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The growth in national construction costs continued to stabilize in the first quarter of 2024, according to CoreLogic’s latest Cordell Construction Cost Index (CCCI) report. The Q1 2024 national CCCI, which tracks the cost to build a typical new dwelling, recorded a 0.8% rise, on par with the increase seen over the December quarter last year.
The stabilization in the quarterly trend saw the annual change in the CCCI ease to 2.8%, the smallest annual rise since the year to March 2007 (2.7%) and well below the pre-COVID decade average (4.0%). This comes as detached dwelling approvals hit a 12-year low in January.
CoreLogic Economist Kaytlin Ezzy said, “The strong fluctuations seen in building material costs over the past few years have levelled out and are now within normal margins.” However, she noted that current building costs are still 27.6% higher than at the start of the pandemic, likely putting significant pressure on builders’ profit margins.
Looking ahead, Ezzy expects construction costs to remain within usual margins in the coming year, as national dwelling approvals have held well below average in 2023 and continue to do so into 2024, helping to dampen the growth in construction costs. Despite this, the construction pipeline remains bloated, with ABS building activity data showing around 255,000 dwellings approved but not yet completed, which should help keep builders busy throughout 2024.
Key findings by state for the Q1 2024 CCCI Report:
- New South Wales and Victoria saw a slight pullback in growth, both up 0.9%, while the quarterly change in Western Australia held steady at 0.7%.
- Queensland and South Australia both recorded an acceleration in growth, up 0.7% over the three months to March.
- NSW’s annual CCCI increase was 3.1% over the 12 months to March, on par with the previous reading in the 12 months to December.
- Victoria’s annual CCCI increase was 3.1% over the year to March 2024, up from 2.9% over the year to December, the lowest annual change since December 2016 (2.6%).
- Queensland’s annual CCCI increase was 2.3%, down from 2.8% over the 12 months to December, the lowest annual change in construction costs across Queensland in almost 14 years.
- Western Australia’s annual CCCI increase was 2.1%, the lowest annual change in construction costs in almost seven years.
- South Australia’s annual change in construction costs was 2.6%.