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Over the June quarter, construction costs rose 0.5 per cent, according to Cotality’s latest Cordell Construction Cost Index.
This follows a 0.4 per cent increase in the March quarter and reflects annual growth of 2.9 per cent.
The rising cost of building homes factored into the Reserve Bank’s decision to hold rates at its July meeting.
RBA governor Michele Bullock said inflation was “slightly stronger than expected” due to construction costs.
The next Consumer Price Index from the Australian Bureau of Statistics is being released on 30 July and will influence the next RBA meeting on 11–12 August.
Other upcoming releases, such as the Labour Force and Building Activity data, will also factor into the central bank’s decision.
Cotality’s research director Tim Lawless said the continued rise in construction costs will make it difficult for the government to reach its 1.2 million new home target by 2029.
According to Cotality, there has been a 31 per cent increase in costs over the last five years.
Recently, even the government admitted (albeit accidentally) that the target would not be met unless a concerted effort and even tax hikes helped propel figures.
Builders are juggling red tape and high material and labour costs, stalling progress.
“Higher construction costs remain a key blocker for getting more desperately needed housing supply into the market. High costs have eroded builder margins and contributed to the housing affordability crisis,” said Lawless.
[Related: Treasury unintentionally admits housing target won’t be met without raising taxes]
