How much it now costs to build a house in South Australia

The cost of building a new house in SA hit an unprecedented level in July, but industry experts say material and labour prices are starting to soften. Here’s what you need to know.

South Australia’s average new house build cost set a new record in July as it climbed to an unprecedented $378,155.

Australian Bureau of Statistics data released last week shows an almost $19,000 surge from June reversed a declining trend that had been in place since the state’s typical housing construction cost topped $370,000 for the first time in March.

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But with new home approvals currently well short of the levels needed to reach an ambitious 1.2 million new homes goal for the nation by 2029, some of the country’s biggest property players have warned its time for the governments to join home builders in tightening their belts.

Simonds Group chief executive Rhett Simonds said the home building giant had observed material and labour costs start to soften at the front end of construction on things like timber frames and even brickwork, and there were also signs demand would soon ease for later stage trades including tilers.

The average new house build cost in SA reached a new record in July. Picture: Brett Wortman.

In dollar terms, Metricon chief executive Brad Duggan said timber frame costs had dropped from a $5.40 a linear metre peak in May last year to about $2.80 today.

The boss of Australia’s biggest home builder noted the main reason for a plateau in building costs prior to July had been a change in the mix of homes being built.

“There’s a lot more single-storey homes rather than double-storey homes. There’s a lot less marble benchtops,” Mr Duggan said.

He said that with South Australian homebuyers able to go from visiting a display home to having construction start on their block in about 10 weeks, it was currently the fastest state in the country to get a new home started.

But with the time it takes to build a home still more than double historic norms, Mr Duggan said the industry would need to be “very careful” as it ramped up to near record levels of building activity to reach the nation’s new housing targets.

Construction sector insolvencies reported to the Australian Securities and Investments Commission in the past financial year soared to 2213, almost double the figure for the prior 12 months, and a further 442 have already been announced since July 1.

The insolvencies are the fallout of an industry crisis sparked as record housing construction collided with material and trades shortages over the past two years, leading to the collapse of major builders including Porter Davis, Clough Group, ProBuild and Condev.

But Housing Industry Association senior economist Tom Devitt said they now believed the worst of the nation’s construction sector insolvencies were behind it.

Industry experts say material and labour costs are starting to soften. Picture: Brett Wortman.

“We are not expecting an insolvency spiral where the whole industry runs into trouble now, we are hoping the last numbers are the shadow,” Mr Devitt said.

Mr Duggan added that as building volumes continued to slow insolvencies would centre on supply chain and subcontractor businesses.

Property Council of Australia chief executive Mike Zorbas said governments needed to do more to encourage housing diversity if the nation was to reach the 1.2 million new homes target by 2029.

Mr Zorbas said while state government reforms to housing taxes and planning regulations would benefit South Australia, it was currently tied with Western Australia in closing the housing supply gap.

Mr Devitt agreed and said both interest rate reductions and planning tweaks would be needed to get “anywhere close to the government’s 1.2 million homes target over the next five years”.