The average cost of a new detached house rose 19.6 per cent over the 12 months to January as inputs such as labour and materials surged in price, pointing to further pain for builders even as demand slows.
Year-on-year inflation in new house values surged to its highest rate in over three decades while approvals of new detached homes dropped 17 per cent to 8872 from December, analysis of Australian Bureau of Statistics data on Thursday showed.
Painfully high materials and labour costs – which drove ASX-listed home builder Simonds Group to a loss for the six months to December – are set to remain as the country’s home builders make their way through the large volume of contracts signed during and even after the federal government’s HomeBuilder incentive program.
“With the backlog of work continuing to escalate, cost pressures and delays are set to persist all the way through 2022 and into 2023,” said BIS Oxford Economics principal economist Tim Hibbert.
“The cost growth profile is going to be strong into 2022 – well into double digits nationally for houses and that’s on top of a pretty frothy 2021.”
Separate industry data on Thursday showed inflation still raging in January, with an index of construction selling prices rising to a record 86.8 points. A separate measure of input prices – on an index in which any reading above 50 index indicates growth – ticked down 0.4 points to 95.6.
“With capacity utilisation at very high levels, employers from across the construction sector reported ongoing difficulties in filling positions particularly for skilled labour,” said Ai Group chief policy adviser Peter Burn.
“These conditions, together with the rebound of new orders suggest further inflationary pressures in the period ahead.”
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