Aussie home building costs have risen 1 per cent as a result of the fuel crisis, so far. Picture: NCA NewsWire / Flavio Brancaleone.
The cost of building a house in Australia has risen 1 per cent, a minimum of $3500, since the start of the Iran war as a direct result of oil price and fuel cost surges.
And there is a forecast of another $31,000 hit on its way as a result of other cost increases for materials, with a 6 per cent annual increase now being forecast outside of the fuel crisis.
On the most affordable four-bedroom, two-bathroom house build, the 1 per cent oil shock increase equates to an about $3500-$4000 increase, according to Housing Industry Association figures.
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With the national average house build cost reaching $522,537 in February according to Australian Bureau of Statistics data, for many builders the impact has been north of $5000 — with limited scope to recoup the increase if they are using a standard fixed-price contract.
However, those signing on for a new build will likely be seeing the increase added to their bill.
With that calculation based on the past month, the length of the conflict in the Middle East and its impacts on fuel supply and oil for related products including resins and PVC piping, could grow.
The nation’s homebuilding goals are already lagging behind, with rising costs expected to slow an increase in new construction in the months ahead.
HIA chief economist Tim Reardon said while he was not expecting the increases to have a significant impact on their own, coupled with the higher prospect of interest rate rises, they would likely “keep a lid on the number of purchases” of new homes this year.
That would be dire news for national housing targets to build 1.2 million new homes in a five-year span ending mid 2029, with the nation already more than 77,500 builds off the pace.
“We are still expecting growth in sales in the next 12 months, but the rate of the increase will slow in the wake of higher interest rates and higher construction costs,” Mr Reardon said.
“But despite the additional fuel price costs, we are more concerned with the possibility of Capital Gains Tax change than the fuel increasing the cost of construction.”
The economist warned that any change that turned away investors could have significant impacts on future building activity.
Mr Reardon added that key industry supply groups were providing information suggesting that even without the Iran war there would be a 6 per cent or so increase, double the consumer price index, in building costs in the year ahead from July 1.
This is consistent with recent years.
HIA chief economist Tim Reardon says while costs are rising at the moment, the biggest risk to Aussie housing construction is government tax changes Picture: Leighton Smith.
That would add north of $31,000 to the cost of building the average home if passed on to homebuyers.
The increase would be caused by a combination of a rising cost of living and energy costs outside of fuel that were impacting the production of materials.
He noted that concrete was a key factor within this group, though other areas like timber frames should not see as significant an uptick.
While in some instances, such as for new projects, the bills are likely to be passed on to consumers, by and large builders have been absorbing the cost increases from the global oil crisis themselves.
Australian Builders Collective president Phil Dwyer said the increases were alarming for builders, particularly smaller operators.
“The feedback is that Covid nearly sent us to the wall, and now we have this,” Mr Dwyer said.
Housing construction is already not keeping up with government targets.
Fuel costs and other ramifications of the conflict in the Middle East will be discussed as part of a three-day HIA Congress industry event being held from today to Saturday.
Other key topics will include the use of AI in the building industry, the recycling of construction materials, taxation on the housing sector, as well as productivity and housing policy.
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