The cost of building a new home grew at the fastest annual rate in more than 15 years during 2021, with warnings that the price of new homes and renovation projects will likely rise again this year.
Residential construction costs nationally jumped 7.3 per cent during 2021, according to the latest data from CoreLogic's Cordell Construction Cost Index, the highest figure recorded since 2005.
CoreLogic research director Tim Lawless said that continuing supply chain disruptions would continue to wreak havoc on the construction sector during the early months of 2022.
"With some materials such as timber and metal products reportedly remaining in short supply, there is the possibility some residential projects will be delayed or run over budget," Mr Lawless said.
He said that the cost increases are primarily due to the cost of structural timber, although metal costs were now also playing a role.
"With such a large rise in construction costs over the year, we could see this translating into more expensive new homes and bigger renovation costs, ultimately placing additional upwards pressure on inflation," Mr Lawless said.
Executive director of the Master Builders Association NSW, Brian Seidler said that beyond availability of materials, a labour shortage in the sector was also contributing to price growth.
"The second issue is the availability of trades due to COVID and a couple of other reasons ... that means the cost of a tradesperson has gone up," he said.
"A lot of tradespeople came from overseas ... and as COVID shut the industry down a lot of them went back home."
The relaxation of Australia's border rules would alleviate some of this pressure, but wouldn't provide an overnight fix, he said.
The latest wave of the Coronavirus had also made completing projects on time difficult, with isolation protocols for close contacts leading to "between 20 to 35 per cent absenteeism".
Mr Seidler said that many builders were running into financial difficulties after signing fixed-price contracts with consumers and then having to deal with unexpectedly high material costs.
