Outlook to 2023 for Construction Costs

Will there be any glimmer of improvement for Australia’s construction industry in the year ahead?

The fresh year ahead of us & our reinspired expectations of the property market seem somewhat clouded by the lingering hangover that was 2022 & it’s spiraling constructions costs. Didn’t discriminate against building or renovating - all an expensive mess.

The challenges and ongoing frustrations experienced by consumers, builders, suppliers, and trades alike resulted in a turbulent year for the construction industry, and one that recorded an increase of ~11.9% according to CoreLogic Cordell Construction Index (CCCI).  As a comparative, 2021 saw a 7.3% increase in this same sector.

For those who are in the stranglehold of building and having to accept the consequences of delays in materials, labour shortages and completion dates; there is of course the additional strain of record interest rate rises and extreme rental market conditions dictated by price and availability of accommodation.

So can we expect any reprieve or positive easing of these conditions in 2023?

From our research in speaking with industry colleagues there seems to be a mixed bag of reaction and forecast for the year ahead. Regarding the complex construction issues, there are multiple layers of problems to work through. 

On a positive note, the CCCI registered a quarterly growth rate for the final quarter of 2022 at 1.9%, compared to the previous quarter increase of 4.7%.  Although this welcomed decrease provided a glimmer of hope, given the many factors associated with the construction crisis this result could potentially be inconsequential.

A number of builders are reporting that some materials are slowly becoming more available, with previous shortages now easing. However, the most significant challenge is sourcing sufficient skilled labour to undertake the backlog of work.

Recent data released by the Australian Bureau of Statistics (ABS) shows that the total number of dwellings approved fell by 9% in November 2022, on the back of a 5.6% decrease in October 2022.  The figures confirmed decreases in the total number of dwellings approved for private sector houses in Victoria (-8%), Western Australia (-6.1%), South Australia (-2.6%) and Queensland (-1.2%).

Looking ahead to our property market in 2023, it is evident that the construction sector still has a way to go in pushing through today’s challenges.  It is also evident that our market in general will deliver change and a varied level of performance.

What we can offer our clients is independent professional advice and guidance with your property decisions based on genuine care in helping you reach the best possible outcome that’s right for you.  We encourage you to reach out to our Acumentis team at any time and we will assist you navigate your property concerns.

Nathan King
National Director – Advisory, State Director – WA Operations
— Perth Property Valuers
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