Building materials inflation hits three-year low, but construction costs face rocky road

Plunging steel prices have helped bring building product price inflation to its lowest in almost three years but a bumpy road remains with accelerating inflation of other materials and labour shortages continuing to drive up the cost of building says Master Builders Australia chief economist Shane Garrett.

“During the June 2023 quarter, the cost of building materials increased by another 0.6 per cent, the smallest quarterly increase since the end of 2020.”

“While the slowdown in the overall cost of home building materials is welcome, there has still been a sizeable increase of 7.4 per cent over the past 12 months.

“The past year has seen sizeable drops in the cost of several crucial building materials. The 10.0 per cent drop in steel product prices over the past year was the most significant change, with a welcome reduction of 4.4 per cent in the cost of structural timber also occurring.

“Steel and timber were the source of the biggest cost headaches over recent years – the fact that prices here are now in reverse is something of a relief.

“However, the outlook is bumpy as even though the general trend in building materials prices is a favourable one, there has been a worrying acceleration in the cost of concrete, cement and sand products, a category where prices are now 16.2 per cent higher than a year ago.

“Total building construction prices rose 1.0 per cent in the June quarter and 6.5 per cent over the past twelve months predominately driven by labour shortages,” Mr Garrett said.

Master Builders Australia CEO Denita Wawn said the surge in building costs over recent years has taken a heavy toll on the cost of newly built homes and infrastructure across Australia.

“Latest inflation figures show that new dwelling costs rose by 7.8 per cent over the past year, exacerbating the housing affordability crisis.”

“The rental market has also been hit hard by the surge in new home building costs. During the June 2023 quarter, rental inflation hit its fastest pace since 1988.

“With building and construction costs skyrocketing since the pandemic, it is important that government policies prioritise productivity improvements, reduce supply constraints and maintain flexibility.

“The Federal Government’s proposed industrial relations reforms will have damaging consequences for the industry and further impact the increasing costs of construction,” Ms Wawn said.

Media contact: Dee Zegarac, National Director, Media & Public Affairs
0400 493 071 | dee.zegarac@masterbuilders.com.au