Residential building costs in Victoria rose by five percent in 2017, surpassing all other Australian states.
Prices for developers were pushed up by materials, labour and freight, especially in Melbourne’s fringe suburbs, according to CoreLogic’s latest Cordell House Index Price (CHIP) Report. These costs are often absorbed by the developer, and if not, they are passed on to the consumer, said CoreLogic commercial research analyst Eliza Owen.
Price increases were seen in all states. Following Victoria (in order) were NSW (four percent), South Australia (3.8 per cent), Queensland (3.4 per cent) and Western Australia (2.6 percent). The national average price increase for 2017 was four percent.
Source: Cordell House Index Price Report 2017
These price increases are placing financial stress on developers, and even leading to the cancellation of some projects, say industry experts.
While NSW follows Victoria in actual price increases, Queensland’s prices are growing the fastest, according to the report. Queensland’s CHIP index is 288.3, followed by NSW on 271 and Victoria on 262.7.
The CHIP index is calculated based on construction costs of freestanding and semi-detached single and two-storey dwelling homes. It looks at costs such as excavation and concrete work, brickwork and electrical services.
Queensland’s index has averaged 7.2 points higher than the national figure over the past 20 years, according to the report. Owen has suggested that this is related to the unemployment rate in Queensland’s construction sector, which is higher than the national average.