The index did not point to falling prices, just a slowdown in price rises. Photo: 123RF
Building inflation may have peaked, according to a new survey of the construction industry.
The Cordell Construction Cost Index (CCCI) rose just 0.6 percent for the first quarter, the lowest quarterly increase in more than two years, taking the annual rate down to 8.5 percent from 10.5 percent.
The index is based on building an average three-bedroom single storey house with two bathrooms in brick and tile.
Research firm CoreLogic senior property economist Kelvin Davidson said high interest rates were slowing demand and helping to ease pressures, while price rises for key materials were also easing.
"Availability of important materials such as plasterboard has improved, timber prices have also stabilised to some degree, especially structural timber. Metal components are showing a similarly flatter trend for prices too."
He said the index did not point to falling prices, just a slowdown in price rises, which he expected to be more evident.
"The pipeline of housing that's already been approved remains large - and will keep builders busy for a while yet - so the slowing influence on actual output volumes and construction cost growth may take a while to show through clearly. But the early signs have definitely arrived.
"The longer-term trend certainly points to a continued slowdown in cost inflation as new-build workloads ease into 2024 and capacity pressures become less acute," Davidson said.
He said the sector was in generally good shape, and he doubted the risk of a return to boom and bust conditions, with bigger firms prepared for a slowdown but with good forward orders.