Should you buy a property that needs a reno? Read this first.
Building and renovation costs are surging at record rates with experts predicting high prices will remain for some time.
CoreLogic’s National Cordell Construction Cost Index is tracking annual increases of circa 20% in residential construction costs but reports from construction companies ‘on the ground’ suggest prices may have risen as much as 40%.
CoreLogic construction cost estimation manager John Bennett said costs are rising across timber and metal materials, which are affecting framing and reinforcing.
There was a large inflation in the costs of plasterboard, fibre cement and doors.
Mr Bennet said the increasing cost of raw materials, labour, and fuel are putting pressure on residential building costs as are large increases in waste disposal fees and volatility in professional fees and services.
A 2022 study by the National Housing Finance and Investment Corporation (NHFIC) said supply constraints have pushed the building materials and labour cost inflation to rise at its fastest pace in nearly 50 years.
CoreLogic research director Tim Lawless says “This new high in the cost of construction flows through to margins, unexpected costs for consumers and potentially lengthy delays to homeowners who are waiting on the sidelines”.
“We also forget the impact to existing homeowners and the insurance industry, as they struggle to reassess existing policies in a timely manner to make sure they are adequately covered in the event they need to make a claim.”
Mr Lawless said conditions are set to persist over the short to medium-term given these existing labour and supply issues.
Furthermore, the backlog of construction approved during COVID is still being worked through on top of the rebuilding and repair work due to the recent weather events.
If you’re considering taking on a renovation project for your next property purchase, now would be a good time to re-evaluate your allocated budget and timeline.
