Construction Covid shock: Average cost of building a home up $101k

The average cost of building a home in Qld has surged during the Covid-19 pandemic to hit a new record, rising more in two years than what had taken 15 years before that.

The average cost of building a home in Queensland has surged by over $101,000 during the Covid-19 pandemic to hit a new record, rising more in two years than what had taken 15 years before that.

Housing Industry Association data shows the average build cost in Queensland hit $410,126 in May this year, a record level for the state, after jumping $101,846 from its May 2020 level.

The data showed that the cost of building has never grown that much previously, with even the entire 15 years before May 2020 seeing a rise of just $88,323 (from its May 2005 level of $219,957 to May 2022).

HIA senior economist Nick Ward said the figures proved just how bad the Covid-19 shock was in Queensland.

“That acceleration that you’re seeing in the data reflects the magnitude of the Covid shock to housing in Queensland,” he told The Sunday-Mail.

“Covid has been a significant shock to housing. On one hand, Covid has prompted Australians to put a much higher value on their home environment, in particular they want more space at home and better quality at home, so demand has gone up.”

“But Covid has also put a lot of pressure on international supply chains so capacity is constrained. So with demand strong and capacity constrained, the cost increases.”

The average cost of building a home in Queensland has surged by over $101,000.

Material and input costs for construction rose 15 per cent in the last year and 18 per cent in total during Covid.

As well, Queensland has seen the size of approved houses for construction increase.

“There’s a bit more house per job,” Mr Ward said, much of which was prompted by non-first homebuyer owner occupiers.

“They bring a bit more to the table in terms of housing features like nicer bathrooms, nicer bedrooms and features. There’s a bit of that going on as well.”

HIA Qld deputy executive director Paul Leven said housing affordability was a major concern, with the association in support of better social housing policy measures.

He said there was no relief in sight until the end of 2023.

“The costs don’t historically come down in any significant way but we do expect to see some improvement in the market at the end of next year”.

New home builders are unlikely to see any price relief until the end of 2023.

Mr Ward said the pace of price gains might slow into next year.

“We don’t expect falls in building costs. It’s possible that the growth rate might decline but the reality is the number of homes under construction at the moment is at a record high, and there’s a significant body of work signed but not started. So we expect competition for materials and labour to be quite strong for the next year or so in Qld.”

One of the bright spots for renters was that lending to investors had surged 57 per cent in Qld in the three months to May, over the same time last year, “good news,” Mr Ward said given tight vacancy rates.

Real estate agent Denis Najzar of Place Woolloongabba said on the ground, home build costs had grown much higher than $101,000. “What used to cost $1m to construct is now $1.5m. Essentially people that were looking to build or renovate are now probably shocked by quotes they’re getting from builders, and good builders probably can’t start right away. It’s a long queue to wait for a good builder, could be up to two years.”

He said with the cost, wait and effort buyers were probably better off exploring houses that were ready to be occupied. “I am concerned that we will have a lack of supply of newer houses on the market.”

Travis Pegg, with his wife Melissa Hanbidge-Pegg and children Sebastian, 4, and Harriet, 2, are selling their house at Camp Hill and are planning to build a new home. Picture: Steve Pohlner

Developer Travis Pegg has listed his home at 71 Sydney Ave, Camp Hill for sale, built before construction costs blew out – and plans to build again though it may take careful planning and a longer time frame to complete. Energy efficiency, a triple garage, office and home theatre were necessities post Covid, he said.

“A three-car garage was a necessity,” he said, “as we are storing a lot more items these days and our children are staying at home longer into driving age”.

The “additional flex space” was perfect for on demand vehicle garaging or a home gym, he said of the home which is now for sale.

“Similarly, the home office was one of the most used spaces during the pandemic, allowing a quiet space to work away from the kids and the rest of the family. With flexible work happening so much these days, a dedicated home office is a must have in any newly built house.”

The home theatre was a luxury addition, he said, but it got a lot of use.

“We have used ours just as much for building lego on the big ottoman, as we have for watching sport like the State of Origin. There is something impressive about watching a good movie or a big sporting game on an over-size screen with an amazing sound system.”

Originally published as Construction Covid shock: Average cost of building a home up $101k