As Australia continues to experience a strong housing boom and limited supplies of materials, construction costs are rising with no signs of an imminent slowdown.

Abode Construction Director Justin Andrews explains, “There are a number of factors that are contributing to this cost increase and that come together to create a perfect storm.”

Factors include a huge surge in demand from the HomeBuilder grant released at the start of the coronavirus pandemic, an increase in interstate migration, relaxed mortgage loan criteria, and early government access to a retirement access system in one setting of continued record low interest rates.

These aren’t the only factors. The ongoing repairs for natural catastrophe insurance in Queensland continue to monopolize many traders such as roof installers and carpenters. Only a fraction of the workforce is available for new residential projects in Brisbane.

Additionally, imported materials are still being delayed by disruptions in the Covid supply chain – mostly from China. With the US also in the midst of a construction boom, exporters are poised to supply the top bidders, which has led to a rise in the price of materials like wood and steel. However, there are persistent problems throughout.

“We have seen sudden price increases on almost all of the construction products we use with virtually no notice,” says Justin Andrews.

As the prices of building materials continue to rise, construction costs have skyrocketed – without the value of the property increasing after completion.

“Real estate appraisers don’t see that the house is worth more just because construction costs have gone up,” says Justin Andrews

Some construction companies have chosen to include special terms or tentative amounts in their contracts to help resolve the problem. However, many have had these contracts rejected by mortgage lenders and banks. Often these special terms and conditions are not legally enforceable, as you are legally obliged to ensure security with house construction contracts with very few exceptions.

While Justin admits that there will be minor fluctuations over time due to inflation or other economic changes, he predicts it won’t return to pre-construction levels in the near future.

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