Building costs ease as demand for construction slows

Builders and tradies have been battling fast-rising prices for materials and labour but  data suggests price growth is slowing.

The slowdown in new construction, with dwelling approvals trending below average, has helped dampen growth in costs, CoreLogic economist Kaytlin Ezzy said.

The property data firm's construction cost indicator recorded a 0.8 per cent increase in costs over the March quarter.

This was the same pace of growth as recorded in the three months to December and below the one per cent average growth in the decade before the pandemic. 

Total dwelling approvals fell another 1.9 per cent in February, based on the latest Australian Bureau of Statistics data, and recorded the lowest monthly count since June 2012 in January at 7,701.

The cost of building a home skyrocketed in the early phases of the pandemic recovery, with critical materials and workers in short supply.

While steel, timber and other input prices are no longer growing as quickly, they remain 27.6 per cent higher than at the start of the pandemic.

Ms Ezzy said this was likely keeping pressure on builder profit margins but the outlook was improving. 

"National dwelling approvals have held well below average in 2023 and are continuing to do so into 2024, helping to dampen the growth in construction costs," the economist said.

And building activity data released by the bureau on Wednesday revealed a minor improvement in dwelling starts over the December quarter but a sharp 10.5 per cent reduction on the year before. 

Yet Ms Ezzy said the building activity data showed about 255,000 dwellings had been approved but were not yet complete, which would "keep builders busy throughout 2024".

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