Adelaide’s housing construction costs among highest in nation as building approvals slow

Adelaide’s building costs are among the nation’s highest, amid a skyrocketing demand for new homes and shortages of materials and workers.

The cost of building a house in South Australia is outpacing most of the nation, fuelled by unprecedented demand for new housing and the shortage of construction supplies.

And builders who have been grappling with surging prices in materials such as timber and steel are also facing a worsening trade shortage.

Adelaide’s house building construction costs increased 8.6 per cent in the past year, second only to Melbourne, according to the ABS Producer Price Index, which measures costs of items when they enter and leave the production process.

But Adelaide led the nation with the largest increase in timber products, including structural beams, board and joinery, which jumped 14.9 per cent in the September quarter when compared with the same period last year.

Adelaide also had the biggest jump in plumbing supplies, up nearly 10 per cent, while steel increased 19 per cent, below the national average of 23.7 per cent.

Covid import constraints, coupled with surging global consumption of building materials, has put pressure on supply and increased prices.

A senior industry source said supply constraints were adding between $15,000 to $30,000 to the build price of an average new SA home.

The federal government’s HomeBuilder stimulus package generated nearly 14,000 applications in South Australia.

Master Builders SA chief executive Will Frogley said South Australia’s per capita uptake of the HomeBuilder housing stimulus grant was the highest in the nation but it had stretched “material and trade capacity”.

South Australia has recorded a nearly 10 per cent increase in housing construction costs due to new housing demand and importation constraints.

“It’s a busy, challenging time for the industry but help is on its way. Timber demand in the USA is reducing and that will see more European imports coming to Australia.”

SA’s building approvals have lead the nation with a 34 per cent increase in the September quarter compared with the same time last year.

But there is a sign that demand is softening with SA recording the nation’s largest drop in private sector housing approvals for the month of September, down 26.8 per cent to 802 approvals on August.

Housing Industry Association SA executive director Stephen Knight said only about half of the nearly 14,000 HomeBuilder applications had been paid out meaning there was still plenty of work on the horizon.

“Demand for finishing trades has increased as the first of the HomeBuilder job are nearing completion. This could put added upward pressure on labour prices for these trades,” he said.

“International demand for timber is coming off the boil so in the long term there could be some easing in cost increases however continuing high level of demand locally will keep the pressure on prices and supply.

“I think that building supply costs could be at their peak however it may not be until early to mid-next year before we get a true picture of where we might be headed.”

Skills shortage

New figures have revealed South Australia is facing a “skills crisis”, with a drop of more than 10,500 apprentices and trainees since 2013, the federal Labor Party says.

Labor has obtained data from the National Centre for Vocational Education, which shows SA has had the most dramatic decline in apprentices and trainees – since the Liberals came into government in 2013 – of any state or territory.

At the end of Labor’s reign in 2013, there were 33,226 trainees and appren­tices. Labor’s recently acquired data showed that there were just 22,718 in the March quarter – a 31.63 per cent decline that was the biggest in the country.

All states recorded a decline, except Tasmania, which rose 12.08 per cent. The NT had a 29.94 per cent drop.

Evidence given at a recent senate estimates hearing suggested the national decline was due to policy changes.

Deputy secretary of the Education, Skills and Employment Department Nadine Williams said the system for existing workers was tightened in 2012-2013.

“Employers were essentially transferring existing workers into traineeships and apprenticeships,” Ms Williams told the committee.

“A series of policy changes were made in May 2012, October 2012 and August 2013 to tighten up that system.”

Despite this testimony, Labor’s skills spokesman Richard Marles said that SA was facing a “serious shortage of highly trained workers in some of our most vital sectors”.

“Businesses are desperate for skilled workers and nearly eight years of federal neglect will take years to overcome,” Mr Marles said.

SA’s Skills and Innovation Minister David Pisoni said that the “real culprit of the ­collapse” was the former state Labor government.