Australia's Construction Costs to Rise Further in Second Half of 2024

According to Rawlinsons Cost Management, a national average increase in construction costs in Australia is likely to be in the order of 4-6 percent across major capitals during the second half of 2024. The cost management and quantity surveying firm has provided an overview of the current market and tendering conditions across each of the nation's eight capital cities.

According to the report, while material price escalation has eased off, skilled labour availability has emerged as a significant issue and it is driving cost pressures. The company expects output price escalation of 4.0% in Sydney and Hobart, 5.0% in Canberra, 5.5% in Melbourne and Perth, and 6.0% in Brisbane, Darwin, and Adelaide.

This report highlights that the rate of escalation can vary dramatically from project to project and that it is driven by factors such as labour availability, energy prices, finance rates, program, material costs, project scale, builders' margin, and supply chain procurement.

Rawlinsons also points out that the detached house sector has huge challenges, and activity remains subdued, with substantial increases in insurance premiums likely to come through over the next few months.

The report also goes on to talk about the rising build-to-rent sector and how it is changing the way developments are designed and costed. BTR means a much more significant focus on operational and maintenance costs over the life of an asset, together with the requirement to provide high-end amenities and spaces which can help drive a sense of community and well-being.

A number of strategies were identified as key to successful BTR developments, acknowledged in the report, which includes more significant allowance for hard-wearing finishes, community amenities, and maintenance access platforms. Further, cost-benefit analysis is necessary to find out the most appropriate heating and air-conditioning system.

In general, the Rawlinsons report gives an overview of the present market conditions and future outlook of Australian construction costs.