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Building your dream home may cost more than you think

·Personal Finance Editor
·2-min read
Australian money and a home in the building stage.
Aussies looking to build their own home may be caught out by rising construction costs. (Source: Getty)

With home prices still sky high around the country, Aussies considering building their dream home may find themselves forking out more than they expected.

New research from CoreLogic found residential construction costs climbed 10 per cent in the 12 months to June.

That is the highest annual growth rate on record, outside of the introduction of the GST.

CoreLogic research director Tim Lawless said the double-digit annual increase was not unexpected, with the impact playing out across several states this year.

“Construction cost growth is an additional concern to an industry already under immense workload pressures as well as economic conditions such as rising interest rates and inflationary pressures,” Lawless said.

“Construction costs have increased more than 25 per cent over the past five years, which has a knock-on effect to builders’ margins, budget blowouts for customers not on fixed-price contracts and home owners waiting for their projects to finish or even start in many cases.

“It’s also impacting the insurance industry, as home owners struggle to reassess existing policies to make sure they are adequately covered in the event they need to make a claim.”

Lawless said things weren't expected to change anytime soon with the short- to medium-term outlook for the construction industry remaining challenging due to ongoing labour shortages and supply issues.

“The pipeline of construction approved during COVID is still being worked through and there’s been a number of major weather events as recently as this month, which require significant rebuild and repair work,” he said.

“This all adds additional demand-side pressure for construction materials and trades.”

Lawless said there was also no reprieve on the supply side, with a lack of materials, higher fuel costs and wider cost-of-living pressures all taking a toll.

“All of these factors have an impact and are likely to push building costs higher for some time yet,” Lawless said.

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