Why construction costs are still high when property values are falling: Michael Matusik

Property values have taken a well-documented slide lately, yet construction costs are still relatively high.

Will they ever head south, the way some sales contracts have?

Demand for domestic construction has cooled a bit in the past few years, but excess workers have been absorbed by stellar projects in commercial construction and mining.

As a result, we haven’t really seen widespread discounting of construction labour, and we certainly haven’t seen discounted building materials – although fixtures and fittings imported from China are more affordable than ever.

Depending on your level of construction expertise, you may have heard of a costs guide called Rawlinsons. It’s an annual bible with quarterly updates and gives an accurate reflection of what’s going on with the costs of all things construction.

You can get bogged down in the specifics – if you want to know how much it’ll cost to lay a 22mm terrazzo floor in Perth, the Rawlinsons guide will tell you. Need to price a partial demolition in Melbourne? Rawlinsons knows the ins and outs of that, too. Building a bank in Adelaide? A pub in Darwin? Rawlinsons will tell you what to budget.

The 2012 guide shows that after big jumps in the early 2000s, construction costs have either plateaued or increased very slightly in the past three years – they haven’t gone backwards.

So how much does it cost to build a house, right now? Or an apartment?

Let’s start with a small, basic house – a project home, if you will. A stock standard brick veneer home of 90-110 square metres will set you back anywhere from $825 per square metre in Adelaide, or $1,280 per square metre in Hobart. In Brisbane and Sydney you can expect costs of around $1,050, while Melbourne is about $1,100 per square metre.