It’s getting more expensive to build homes in Victoria with building costs rising 5 per cent last year.
The figure of 5 per cent is higher than the national increase in home building costs in the 12 months to December of 4 per cent.
CoreLogic’s Eliza Owen told Australian Financial Review that the higher rate of increase in Victorian home building was being driven by the sharp growth in demand for housing in Melbourne.
Ms Owen said it was likely to drive property prices higher or mean less profit for developers.
“Either the costs of these developments are absorbed by the developer or passed onto the consumer,” she said.
The figures come from the latest CoreLogic Cordell Housing Index Price and are based on the construction costs of freestanding and semi-detached single and two-storey dwelling homes.
According to the report the big driver of the 5 per cent increase in Victoria was the high number of projects on the outskirts of the metropolitan area.
“In Victoria, because they haven’t had the same level of economic growth and population growth that NSW has had in the past, we’re starting to see more demand for dwellings, starting to see more greenfield sites being developed and there’s potentially more of a shock to residential building in outer Melbourne as a result and potentially more freight costs involved,” Ms Owen told AFR.
Developers are feeling the pressure from the rising costs according to Andrew Hogan from project manager Point Polaris .
“Sales are taking longer, finance is taking longer,” he told AFR.
“You’re under construction later than otherwise allowed for in initial feasibility.”
Escalation costs starts to bite earlier than it would.”