Are you waiting for Constructions Costs to come back down?
"We will just wait until construction costs come back down". I can't tell you how many times I've heard this from hopeful homeowners in the last few months. Unfortunately, I think the wait may be exceptionally long, if not indefinite.
We know many compounding factors caused the steep and unanticipated rise in construction costs. Including but not limited to material price increases, material shortages, trade shortages and increased freight and transport costs.
So if construction costs aren't likely to go back down. A more pertinent question would be, "when will construction costs stabilise"?
The Australian Bureau of Statistics(ABS) data for Quarter 2 of 2022 reflected output costs for 'House Construction Australia' are still rising. Like most residential building industry professionals, I have my fingers and toes crossed that the ABS data for Quarter 3 will reflect the rate of increase has hit its peak and is now showing signs of slowing.
The graph below demonstrates the accumulative effects of actual and anticipated price rises for House Construction Australia. The left of the vertical black line reflects output data from the ABS, and the right of the line is my prediction of where construction costs are heading.
Back in 2019, the rate of increase was stable. As a result, builders and designers could forecast the cost of projects with relative confidence based on expert experience and previous project pricing. But then 2020 arrived, and the world as we knew it changed forever.
I predict construction costs will continue to rise, but the rate of increase will diminish until we arrive at our 'new' stable. Pre-2020 projects were priced. Post-2020 projects need forecasting.
If you are planning a new home build or major renovation project, there is no need to fear construction costs, but it would be remiss of us to ignore the evidence. We can no longer rely on current or past project pricing to estimate your budget. Instead, we must determine your project budget by forecasting your anticipated construction start date and adjusting for calculated inflation.
Budget forecasting is a core element of the Home Build Mentoring program. The client's initial shock of learning forecasted construction rates is real but fleeting. I see them quickly regain control and direction when their design brief is developed concurrently with their forecast budget.
Gone are the days of pricing. Arrived are the days of forecasting.