News

October 2022 Australian Construction Cost Adjustments

As the researcher, compiler and publisher of the Rawlinsons Australian Construction Handbook and Cost Guide, we maintain the most up to date data in the construction industry. Please read on for our Quarter 3 pricing adjustments. For a copy of your annual publication, head to www.rawlhouse.com.au.

Sydney

A slight levelling of material escalation was experienced across all sectors in the construction industry, as the effect of the easing of border restrictions and opening of supply chain procurement routes began to take place. However, comparatively low levels of immigration, coupled with strong construction activity, means contractors are less likely to reduce margins and take-on significant risk. The war in Ukraine still continues to impact some common material prices and energy prices, which is having an impact across all sectors. It is likely that construction costs continue to increase slightly for remainder of 2022, however at a much lesser rate than was witnessed throughout 2020, 2021 and the first few months of 2022.

Noteworthy increases

  • The price for brick supply has increased by 5%
  • The price for timber supply have increased by up 12.5%

Melbourne

The high level of activity and outlook within the Victorian construction industry continues to remain relatively positive, despite the industry continuing to be adversely affected by increasing material, transportation, fuel and energy costs. Ongoing supply chain and availability of labour issues remain, along with the effects of general inflation and a growing volatility in tendering prices. The effects of the recent increasing and potentially further future increasing of interest rates by the RBA are yet to be fully realised across the various construction industry sectors.

Noteworthy increases

  • The price for LVL and laminated beams have increased by 10-15%
  • Prices brickwork labour have increased by 5-10%

Perth

Ongoing supply chain issues and the lowest levels of unemployment in Australia are still negatively affecting project costs. Tender rates continue to increase to adequately cover the uncertainty of material and labour supply issues, with some contractors overly inflating their tender rates as a risk avoidance strategy. Predictions relating to more interest rate rises during the remainder of 2022 are influencing the viability of projects moving forward.

Noteworthy increases

  • Prices for timber (hardwood) supply have increased by up to 45%
  • Prices for LVL and laminated beams have increased by 10-20%

Brisbane

The moderation of price increases has continued as building approvals soften whilst still maintaining a high level of activity. This is anticipated to continue throughout 2023 as demand continues to soften due to a combination of domestic and international market factors and as existing projects reach completion.

Noteworthy increases

  • Prices for aluminum windows have increased by 5%
  • Prices for mechanical services have increased by 5%

Adelaide

Dwelling approvals are down seventeen per cent in the month of July 2022, due to the early effect of the interest rate increases, with this trend expected to continue into 2023. Notwithstanding, significant construction “catch up” is still occurring, with moderation not expected until mid 2023. There are early signs that structural steel prices will moderate in early 2023, particularly relating to tubular sections, due to the softer demand in Asia. The non-residential sector is showing signs of slowing, due to diminishing tender opportunities. Labour constraints are still a major issue in all sectors of the construction industry and will continue for the foreseeable future. Achieving contract completion dates is now problematic and this has affected sustainable cashflow and profitability outcomes. Current trends in relation to First Homes Buyers funding indicate that lending is down approximately thirty-five per cent over the past year, which does not bode well going forward.

Noteworthy increases

  • Prices for labour (generally) have increased by 7-10%
  • Prices for brickwork labour have increased by 10-15%

Hobart

An overheated market currently operating beyond capacity continues to create difficulties, with pricing volatility and project delays common. Contractor availability and labour shortages are currently an impediment to project delivery which has resulted in changes in procurement strategies with tendering now much less likely to achieve desired outcomes. The growing population and ongoing investor confidence, coupled with healthy government expenditure, is expected to foster continued growth in the industry well into the foreseeable future.

Darwin

The Northern Territory is experiencing a growing construction industry, particularly in the infrastructure (roads) and defence sectors. Private residential projects are becoming somewhat challenging to make “stack up”, due to increasing construction costs coupled with steadying sales prices. Cost increases in many trades caused by both fragmented supply chain issues and labour shortages have led to volatile pricing in some areas of the subcontract market. Margins are moving upwards and are now dependent upon contractor appetite for each individual project.

Canberra

Construction Industry remains at full capacity particularly the residential sector. While material shortages have improved over the last quarter, skilled labour shortages remain a dominant issues for most sites which are the major cause of protracted programmes. Increase in the fuel subsidy at the end of this quarter may well impact on the price of many goods and services related to the building industry. Price of land and availability in the ACT is becoming a major stumbling block for many, mainly due to the commencement of many land subdivisions in the NSW areas surrounding the ACT which many see as being better value for money.

Our annual Construction Cost Publications contain comprehensive pricing information and data sources for Australian construction, covering all Australian states and territories, including regional indices.
Your annual edition will include 3 Quarterly updates so you are kept up to speed all year.
Head over to www.rawlhouse.com.au or call us on 08 9424 5800.