It depends (as always) on which expert you are listening to.
Dominic Schiafone – News.com.au, August 2022
In their article ‘Experts forecast when surging construction cost inflation will ease’, News.com.au talked to independent global construction and property consultancy RLB. In their opinion:
“The rate at which construction costs are soaring – contributing to a spate of high-profile building company collapses – will ease next year, according to new forecasts.
Construction cost inflation in Melbourne is forecast to halve, dropping from 8 per cent this year to 4 per cent in 2023, and in Sydney it is predicted to slow from 6.9 per cent to 3.9 per cent.”
RLB research and development director Domenic Schiafone believes that the forecasted decrease in prices was because of curtailing demand, based of inflationary pressures
“This easing of demand should allow manufacturing and logistics to get back to ‘normality’ or pre-Covid levels,” he said.
Tristan Angelini – The Sydney Morning Herald, January 2023
Tristian Angelini, third generation builder from Melbourne and managing director of constuction company Hilbrook, told the Sydney Morning Herald “New home builders and renovators are set to face more pain in 2023 as construction costs continue to rise, due to labour and material shortages as a result of the pandemic and the war in Ukraine still biting.
Interest rate hikes have slowed down some of the craziness for new builds and renovations, but they haven’t stopped it.”
Mr Angelini explains that labour costs continue to soar as, “We’re not getting all the workers from England, Ireland and Brazil anymore.”
Tim Reardon – The Sydney Morning Herald
Chief economist of the Housing Industry Association, Tim Reardon is optimistic coming into 2023. He believes that although construction costs rose 20% last financial year, it will begin to plateau and only rise 5-7% in 2023-2024.
“We’ll still see prices grow, but by 2024 that rate of growth we expect to slow considerably,” Reardon said. “The rises in the cash rate are taking demand out of the new housing market but, in contrast, we don’t expect renovations to slow at all.
“They’ll continue at that same elevated level as many people are now working from home and COVID lockdowns showed them how they wanted to improve their homes, while many households built up their savings.”