This could be the news you’ve been waiting for…

CoreLogic recently released a report stating the Cordell Construction Cost Index (CCCI), residential construction costs are rising at the slowest annual pace in over two decades, which you can read via the link below, or, continue reading below for our digested version, broken down for home owners:

The national construction costs for Q2 2024 recorded a modest 0.5% increase, down from the 0.8% rise in Q1. This marks a 2.6% annual increase, the smallest since March 2002, and significantly below the pre-COVID decade average of 4.0%.

What Does This Mean for Home Buyers and Builders?
While the growth rate of construction costs has slowed, it’s important to note that prices remain high. Construction is nearly 30% more expensive now than it was before the COVID-19 pandemic. However, this stabilisation in cost growth is a positive sign for potential homebuyers and those considering renovations.
Tim Lawless, CoreLogic Research Director, points out that the reduced pace of cost increases can help repair builder profit margins and provide more stable pricing for new builds and renovations. This could mean more predictable budgets for your construction projects moving forward.

Material Prices and Supply Chain Stability
One of the contributing factors to this deceleration is the reduced pricing volatility among construction materials. Essential materials like timber and metal products, which are crucial for framing, trusses, floors, cladding, and roofing, have seen price reductions. This is a welcome change after the significant supply chain disruptions experienced during the pandemic.
However, it’s essential to recognise that while some material costs have decreased, labor costs remain high, continuing to impact overall construction expenses.

Construction Costs vs. Inflation
Interestingly, the rise in construction costs has been slower than the general inflation rate. In Q1 2024, the national CPI increased by 1.0%, whereas residential construction costs rose by 0.8%. With a 0.5% increase in Q2, it’s likely this trend will continue, potentially easing inflationary pressures related to housing costs.

Building Approvals and Market Activity
While there was a notable 5.5% increase in building approvals in May 2024, it’s too early to declare a recovery in construction activity. Approvals are still near decade lows, and many approved projects have not yet started due to various challenges. This sluggishness in building activity underscores the importance of careful planning and realistic timelines for your construction projects.

Final Thoughts

The current trend of slower growth in construction costs offers a glimmer of hope for those looking to build or renovate. While prices remain elevated, the stabilisation provides a more predictable environment for budgeting and planning. If you’re considering building a new home or undertaking significant renovations, now might be a strategic time to proceed with more confidence in your cost estimates.

If you are after some guidance on renovation, building or general home improvements, I am always happy to share the knowledge I have gained through my extensive history in construction and property development.

Reach out anytime on 0447 120 125 or james@mgpproperty.com.au