Australia’s residential construction industry is facing pricing and productivity challenges, which is limiting the amount of new housing that is being built.
The Cordell Construction Cost Index, which tracks the change in the cost of labour and materials to construct a lowset detached house, rose 1.0% in the September quarter. This was up from 0.5% in the June quarter, but well below the peak of 4.7% in the September 2022 quarter (see graph).
Nevertheless, challenges remain for new housing supply, according to CoreLogic’s head of residential research, Eliza Owen.
“The stickiness in construction costs without an offset in increased productivity is likely to lead to less project feasibility and low approvals. The particularly low levels of apartment development will also mean a higher ratio of demolitions to dwellings completed, and lower net completions than in the 2010s,” she said.
“There are some signs of capacity easing at the early stages of construction, such as in commencement times for detached houses, but more must be done to increase the capacity and productivity of the sector.”
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