Construction Cost Update as We Head Into 2024

As you’re probably aware, construction costs have been in the news after posting an 11.9% growth rate in 2022. You’ve probably heard whispers about the cost of building a home zigzagging like a roller coaster. Well, it’s time to buckle up and explore what’s really happening with construction costs as we step into 2024.

The Latest Twist in Construction Costs

CoreLogic’s latest Cordell Construction Cost Index (CCCI) just dropped some fresh numbers, and guess what? There’s a slight uptick in the cost of building a typical new dwelling. We’re looking at a 0.8% growth over the last quarter of the year. Sure, it’s a bit of a jump from the previous four quarters, but it’s more like returning to the old rhythm rather than a wild new surge.

Back to Basics

Kaytlin Ezzy from CoreLogic puts it in perspective: the growth rate, although up, is still a tad below the pre-COVID decade average. So, it’s like the construction cost growth is getting back to its old groove after a bit of a rollercoaster ride. Remember, we saw a whopping 11.9% peak over the 12 months to December 2022. Now, it’s simmered down to a more modest 2.9% annual growth – the smallest rise since way back in March 2007.

What’s Happening on the Ground?

John Bennett, the guy who keeps an eye on construction cost estimation at CoreLogic, sheds light on the current scenario. Pricing is a bit like a game of ping-pong with no clear trend. Some suppliers are hiking up prices, while others are scaling back. It’s a mixed bag of increases in hardware and chemicals, and a seesaw of timber and metal prices.

The Bigger Picture

Despite the slowdown many predicted with the interest rate hikes, the building industry is still buzzing. There’s a healthy load of projects keeping the wheels turning, keeping cost pressures up. But the state-by-state picture shows some variety – NSW, Victoria, and WA saw growth, while SA and Queensland took a little breather.

Peering into the Crystal Ball

Looking ahead, the construction cost landscape is a bit hazy. While a drop in costs isn’t likely, the growth rate could sway based on several factors. Dwelling approvals are on a bit of a rollercoaster themselves, and any future cash rate cuts could stir up the housing demand pot. But one thing’s for sure – this normalization in CCCI growth is a silver lining for builders, insurers, and homeowners.

State-by-State Snapshot

  • NSW: Up by 1.0%, but hey, it’s just hovering around the pre-COVID average.
  • Victoria: Leading the charge with a 1.1% rise this quarter.
  • Queensland: Playing it cool with just a 0.1% increase.
  • WA: A steady rise of 0.7% over the quarter.
  • SA: Taking a slight dip with a 0.5% increase.

Wrapping Up

CoreLogic isn’t just crunching numbers for the sake of it — this data is gold for businesses making big decisions, estimating rebuilds, and pricing risks effectively. However, local costs could very well depart from costs viewed from a macro perspective across the country.

So, there you have it, folks. The construction cost landscape is as dynamic as ever, but with a hint of normalcy peeking through. Keep an eye on these trends, because, in the world of construction, forewarned is forearmed!