Construction prices grow in busy first quarter, but a post-lockdown easing is expected

High levels of building activity pre-lockdown pushed housing construction costs up 1 per cent in the March 2020 quarter, according to CoreLogic's latest Cordell Housing Index Price report.

Inflation of prices has been near ubiquitous over the last few years, with 11 of the previous 13 quarters having experienced a rise in housing construction costs.

A hive of activity as evidenced by 37,882 residential building consents granted in the year to February—a high not seen since September 1974—is credited with the continued upwards trajectory of costs.

However, with construction only just beginning to restart following the complete shut down in level four, the report states pressure on both labour capacity and material price inflation is expected to ease in the coming months.

Annualised inflation in the year to March 2020 decreased slightly to 3.6 per cent from 3.9 per cent in the year to December 2019. While the sustained intensity of building activity meant price pressure remained upward, annualised inflation is not as high as its most recent peak in Q4 2017 when it hit 6.9 per cent.

The Cordell Building Indices (CBI) are index figures that measure how prices change in the residential building sector.

For the Cordell Housing Price Index (CHIP), price changes are measured daily using cost surveys and are prepared quarterly. The index is made up of subcategories within the construction industry; those with the greatest weights in the index include 'Carpentry and Joinery', 'Excavation and Concrete Work', 'Preliminaries', and 'Roofing, Insulation and Roof Plumbing'. Together, prices in these four categories make up over 50 per cent of the index.

Labour, materials, plant hire, and subcontract costs in each category are combined in proportions that are typically required when construction takes place.

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