Cost of building a new house skyrockets

While the CoreLogic Cordell Construction Cost Index (CCCI) recorded a an increase of 1.7% in the final quarter of last year - a significant drop from the record 3.4% increase in the three months to September – it still hit the new all-time high, surpassing the previous record of 9.6% set in the third quarter.

The CCCI report measures the rate of change of construction costs within the residential market for a typical, standard three-bedroom, two-bathroom brick and tile single storey dwelling.

Annual inflation for construction costs is expected to hold at about 10% for the first quarter of this year, says Kelvin Davidson CoreLogic chief property economist before easing over the rest of the year as the red-hot residential building sector finally starts to slow.

“However, in a market where existing house values are dropping, it may well be difficult for builders to keep pushing up new-build prices to compensate for higher costs. If so, the net result of continued increases in construction costs, even if at a slower pace, would be further pressure on construction firms’ profit margins,” he says.