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13 October 2021

Building Material Costs are Increasing - Should You Buy or Build?

Written by Tuan Duong
Founder & Director

There is no doubt that the construction industry is doing its best to maintain momentum through this period to support economic recovery. 

However, the building sector, in general, is still experiencing a significant price increase in building materials, particularly when it comes to steel and timber products, due to sourcing and shipping constraints. 

There are three main causes of building price inflation: 

  • First, the Black Summer Bushfires in 2019/2020 destroyed a large amount of local hardwood and softwood.
  • Previously, Australia imported 25% of its timber. That has become tricky to navigate due to the shipping constraints brought about by the pandemic. 
  • And due to the Government Home Builder Scheme, there is a higher demand for materials because of new builds, but a low supply of materials.

Beyond the supply shortages, labour issues are causing building projects to stall, which is significantly impacting when the build is actually completed.

Nonetheless, this does not mean that all builders are struggling with this and you should consult your builder of choice to gain more accurate information based on your building project.

Here’s what you can expect from building cost price increases. 

Adelaide

South Australia’s building and construction industry is still maintaining momentum in supporting the state’s economic recovery. However, due to the shipping constraints and labour issues, the government has allocated funding to facilitate skills training and apprentice support so that the construction industry can meet its skills shortages and focus on sustainability going forward.  

If you decide to build or renovate, you’ll probably see that the building contracts are starting to include certain qualifications relating to the building programme because builders have very little control over the supply shortages and labour issues.

Building MaterialsPrice Increase
Bar reinforcement10%
Brickwork Labour5% - 10%
Brickwork Supply3% - 5%
Concrete5% - 8%
LVL, Laminated Beams15%
Plasterboard Accessories6%
Reinforcing Steel30% - 35%
Structural Steel35% - 50%
Timber Supply80% - 50%

Brisbane

Building contractors are still submitting offers to complete work, so the tender activity levels in the construction industry are strong, and there is no sign that that is going to change in the coming months. 

However, the uncertainty around the supply and demand of building materials impacts how long the building project will take. So, you’ll likely see extensions to contract durations to accommodate extended lead times.

Building MaterialsPrice Increase
Aluminium doors and windows17%
Timber framing15%
PVC supply20%
Roofing and purlins10%
Concrete$10/cum
LVL, Laminated Beams15%
Plasterboard4%
Reinforcing Steel10%
Structural Steel17%

Canberra

The cost of timber and steel products have significantly increased since March 2021 due to overseas demand. Although it’s starting to look like the supply problems are becoming more manageable, a new price benchmark has definitely been set. In other words, if you’re thinking of building, you’ll have to consider the price differences. 

Another thing to note is that apartment block building projects are thriving because of the significant buyer demand and low interest rates. And while this is great for economic recovery,  it has become pretty difficult to find reasonably priced builders for other projects. 

So, you’re going to end up paying higher building costs and material costs. 

Building MaterialsPrice Increase
Blockwork5%
Brickwork5%
Concrete7%
Timber Supply45%
Reinforcing Steel25%

Hobart

Unfortunately, along with the general material price increases, contractors are hard to come by - so there is quite a bit of pressure on tender pricing. In other words, you’re likely going to pay high building costs. 

It’s great for the economy to have the housing sector busy, but with contractors fully booked until next year, you can expect contractor-availability issues for a while.

So, there are limited opportunities to take on new projects in the short-medium term. 

Building MaterialsPrice Increase
Timber Supply15%
Reinforcing Steel20%

Melbourne

Due to the housing boom, it looks like the high level of activity within the infrastructure sector will continue into the next quarter. However, the construction industry continues to endure the COVID-19 restrictions. 

And due to a lack of skilled labour and availability of critical materials, the effects of increased prices will likely be realised in the coming quarters. 

Building MaterialsPrice Increase
Timber Supply10% - 15%
Reinforcing Steel10% - 15%
Concrete5% - 10%
Structural Steel10% - 15%

Perth

Industry pressures such as stimulus packages and material supply issues have pushed up contractor tender prices quite a bit.  And with mining being the cornerstone of the Western Australian economy, the construction industry pricing will continue to rise. 

However, Perth’s lower residential price point has become a key attractor for interstate economic growth. 

Building MaterialsPrice Increase
Brickwork Labour30% - 50%
Fabric Reinforcement50%
Formwork5% - 10%
Structural Steel25%
Timber Supply35%

Sydney

Thanks to the range of policies in place before the June lockdown, the construction industry continued to grow throughout all sectors in Sydney. 

However, the recently increased border restrictions and lockdown have influenced the supply chains and the import time frames, driving more price increases and causing delays in project delivery. 

Fortunately, with the ease of local restrictions looming and the reopening of borders, the sector’s confidence level is likely to recover. 

Building MaterialsPrice Increase
General Labour6.5%
Concrete2.5%
Brickwork Labour5.5%
Blockwork3%
Brickwork3%
Timber Supply5%

Key Takeaways

The Australian construction industry has experienced a period of unprecedented growth in recent years, driven by demand for new homes that is outrunning supply. This trend looks set to continue as prices grow above inflation levels due to shortages with labour and materials - limiting building projects across all major markets nationwide.

In the wake of COVID-19, many global supply chains have come to a grinding halt. This has had major consequences for both material delivery and pricing. Coupled with state border closure, significant labour shortages are resulting in delayed project times. 

While contractors seem to be absorbing the price increases, if they continue to rise, it’s unlikely that they will be able to sustain the absorption. So, if you are considering building a new property, it’s worth taking into account that there is likely to be a significant increase in project costs over the next few quarters. 

Disclaimer: Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal or tax advice. You should, where necessary, seek a second professional opinion for any legal or tax issues raised in your investing affairs.
Tuan Duong is an award winning Quantity Surveyor and leads Duo Tax Quantity Surveyors – Australia’s fastest growing provider of Tax Depreciation. Reach out to him directly on 0431 154 356 or email tuan@duotax.com.au
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