April 2024
Dear Client
CONSTRUCTION SECTOR ON ROAD TOWARDS NORMALISATION OF COSTS
With detached dwelling approvals hitting a 12-year low in January, growth in national construction costs continued to stabilise in the first quarter of 2024, CoreLogic’s Cordell Construction Cost Index (CCCI) shows.
The Q1 2024 national CCCI, which tracks the cost to build a typical new dwelling, recorded a 0.8% rise, on par with the increase seen over the December quarter last year.
This stabilisation in the quarterly trend saw the annual change in the CCCI ease to 2.8%, the smallest annual rise since the year to March 2007 (2.7%) and well below the pre-COVID decade average (4.0%).
CoreLogic Economist Kaytlin Ezzy said while growth in national construction costs have continued to ease from the highs seen through the pandemic, price levels remain elevated.
“The strong fluctuations seen in building material costs over the past few years have levelled out and are now within normal margins,” Ms Ezzy said.
“No clear trend was seen in timber or metal materials, with price changes normalising. Current building costs are still 27.6% higher than at the start of the pandemic, which is likely putting significant pressure on builder’s profit margins.”
CCCI Outlook
Ms Ezzy said construction costs are expected to remain within usual margins in the coming year.
“National dwelling approvals have held well below average in 2023 and are continuing to do so into 2024, helping to dampen the growth in construction costs,” Ms Ezzy said.
“Monthly detached dwelling approvals, reported by the ABS, fell to the lowest monthly count since June 2012 in January at 7,701 and remained -13.5% below the decade average in February.
“However, the construction pipeline remains bloated, with ABS building activity data showing around 255,000 dwellings approved but not yet completed, which should help keep builders busy throughout 2024,” she said.
Key findings by state – Q1 2024 CCCI Report
The quarterly change was reasonably aligned across the states, with Queensland and South Australia both recording an acceleration in growth, up 0.7% over the three months to March. Meanwhile, New South Wales and Victoria pulled back in growth, both up 0.9%, while the quarterly change in Western Australia held steady (0.7%).
• The CCCI for NSW rose 0.9%, down 10 basis points from the 1.0% rise seen over the December quarter, bringing the latest rise in line with the pre-COVID decade average. Annually, NSW saw the CCCI increase by 3.1% over the 12 months to March, on par with the previous reading in the 12 months to December.
• Victoria’s CCCI rose 0.9% over the quarter, down 30 basis points from the 1.1% increase over the three months to December. While easing slightly over the quarter, the Victorian CCCI increased by 3.1% over the year to March 2024, up from 2.9% over the year to December, which was the lowest annual change since December 2016 (2.6%).
• Queensland’s recorded a 0.7% rise in construction costs over the March quarter, after showing minimal growth in the December quarter last year (0.1%). Annually, QLD’s CCCI increased by 2.3%, down from 2.8% over the 12 months to December. This is the lowest annual change in construction costs across Queensland in almost 14 years.
• In WA, construction costs rose 0.7% over the quarter, in line with the rise seen in Q4 2023. Annually, WA’s CCCI increased by 2.1%, which was the lowest annual change in construction costs in almost seven years.
• SA’s CCCI increased by 0.7%, up from 0.5% in Q4 2023. This took SA’s annual change in construction costs to 2.6%.
CoreLogic researches and reports on material and labour costs which flow through to its Cordell construction solutions to help businesses make better decisions, estimate rebuild and insurance quotes easily and, ultimately, price risk effectively.
Construction sector on road towards normalisation of costs | CoreLogic Australia
PRELIMINARY CLEARANCE RATE SLIPS ACROSS SIMILAR AUCTION VOLUMES WEEK-ON-WEEK
There were 1,952 auctions held last week, roughly on par with the week prior (1,985), but returning a lower preliminary clearance rate of 72.7% (75.9% the previous week revising down to 67.0% once finalised).
The volume of auctions held is well down from the pre-Easter period, when the weekly volumes peaked at 3,519, but well above a year ago when 1,708 auctions were held.
Melbourne hosted the most auctions last week, with 855 homes going under the hammer, returning a preliminary clearance rate of 70.8%, similar to the previous week’s result of 70.6% which revised lower on the final results to 62.8%.
827 homes were taken to auction in Sydney, with 74.3% successful on the early numbers, well down from the previous week’s spike in the preliminary clearance rate which reached 81.6%, revising down to 70.4% on the final numbers.
Adelaide was by far the strongest auction market, with a preliminary clearance rate of 87.8%, up from 76.9% over the previous week (finalised at 73.3%). Brisbane recorded a preliminary clearance rate of 77.0% last week, up from 75.0% (finalised at 67.5%), while in Canberra, 58.6% of auctions have been reported as successful so far, down from 61.8% over the previous week (finalised at 60.3%).
Overall, auction clearance rates are holding reasonably firm, slightly above the long run average of 67.8% on the preliminary clearance rate. Capital city dwelling values are trending higher at the rolling four-week rate of about 0.5%, a slight reduction on the end of March rate (0.6%), with stronger conditions holding in Perth (+1.8%), Adelaide (+1.2%) and Brisbane (+0.9%).
We are expecting around 1,900 auctions to be held this week across the combined capital cities.
Preliminary clearance rate slips across similar auction volumes week-on-week | CoreLogic Australia
SA LOOKS TO ESTABLISH TENANT ADVICE SERVICE
The program is set to receive funding beginning on 1 July 2024.
Details contained in the application guidelines for service providers who are bidding to establish South Australia’s new tenant advice service provides insight into what the government is aiming to achieve with the new program.
The state’s Consumer and Business Services (CBS) department has said that it is open to proposals that include, but are not limited to, a program that contains the following purposes:
• Educating and informing tenants.
• Advising and supporting tenants to resolve tenancy issues.
• Assisting tenants with completing tenancy forms or drafting tenancy-related letters.
• Supporting tenants at hearings before the South Australian Civil and Administrative Tribunal.
• Providing a financial counselling service for tenants with low financial literacy.
• Undertaking policy development and advocacy.
The service should also be equipped to deal with residents who rent in residential parks, CBS noted.
Mandatory requirements include the hiring of a full-time qualified and accredited financial counsellor to assist tenants and residents who are in dispute with their landlord or who require financial literacy education.
The service must also provide access to at least one full-time advocate to represent tenants and residents with disputes and who are unable to advocate on their own behalf. An advocate must also be available on a full-time basis to assist at the South Australian Civil and Administrative Tribunal.
Additional staff or volunteers are also required to be able to respond to tenant and resident queries within one business day for assistance in completing forms or drafting tenancy-related letters.
The state is seeking applications from organisations that are either existing or service providers in the state or new entities, and it will accept proposals from two entities working in conjunction.
The successful applicant will be provided with a grant of $350,000 each year for four years to use in the development and implementation of the service, with total funding equating to $1.4 million.
Applications are set to be assessed by a panel of representatives from the Attorney-General’s department, with the ultimate decision to approve a successful applicant falling to the panel and the state’s commissioner for consumer affairs.
SA looks to establish tenant advice service – Real Estate Business
Thank you for your ongoing support!
Regards David, Benjamin & the Team at DB Philpott Real Estate
