Relief on the horizon for home builders

Could construction costs finally be stabilising? New data from the Australian Bureau of Statistics (ABS) is giving home builders and renovators reason to hope.

According to the data collection agency, the cost of house building materials was unchanged in the September quarter, marking the first time that prices have not recorded volatile quarterly adjustments since before the pandemic.

ABS’ Producer Price Index for house construction inputs saw a 0.0 per cent change in the September 2023 quarter compared to the previous quarter, which is a key metric many have been looking at in the construction industry as rising costs have increasingly eaten away at profit margins.

The Housing Industry Association (HIA) described the quarterly results as something of a relief with industry insiders as well as consumers desperate for more certainty around construction costs.

“The slowing in cost of house building inputs reflects a significant easing in the materials constraints that plagued the industry during the pandemic,” said HIA’s senior economist, Tom Devitt.

“This sees the cost of house building materials just 4.4 per cent higher over the year, compared to a 17.3 per cent annual increase in 2021–22,” Mr Devitt explained.

Behind the figures lurked positive signs that some of the materials most impacted by pandemic-era supply chain disruptions are now more readily available.

“Some of the worst affected products during the pandemic are now seeing outright declines in price,” Mr Devitt said.

“Last year, structural timber and reinforcing steel prices were both up by more than 60 per cent on pre-pandemic levels. In the last year, they have declined by 8.8 per cent and 5.3 per cent respectively. Steel beams and sections, which were up by more than 50 per cent a year ago, subsequently declined by 17.2 per cent”.

Home builders aside, Mr Devitt commented that the figures bode well for the economy more broadly, and could bring trickle-down relief for Australians facing the cost-of-living crunch.

“Most of Australia’s pandemic inflationary pressures came from building materials and fuel. As these pressures ease, it will provide more certainty of future house building costs, as well as hasten the need for a cut to interest rates,” he said.

The news will also be welcome to governments that have staked their handling of the housing crisis on the ability to ramp up home building considerably.

Beginning in July 2024, the country is embarking on a period in which it has committed to construct 1.2 million new homes in five years, which would see it churn out new dwellings at an unprecedented speed.

SOURCE: Smart Property Investment   By: Juliet Helmke  31/10/23