Construction and renovation costs have recently reached record-high since 2005. Now that it overtook the fastest annual growth record, people are left wondering what makes building your own home so expensive.
In this post, we’ll take a run-through on common construction materials that are getting more costly and why builders, renovators, and homeowners should pay attention.
As a kid, you used to hear your parents reminiscing how your grandpa built your home with his bare hands. But if people can afford to build their houses before, why is it so expensive to do it yourself these days?
Let’s dig into the numbers to find out why.
Construction Costs On the Rise
The national construction costs rose to 7.3% in 2021 alone, breaking the March 2005 record for the highest annual price growth rate.
Moreover, analysts expect that residential construction prices will continue growing above the average rate for the next quarters as supply chains are continuously affected by global health and economic crises.
That means construction materials will get more expensive as it becomes more difficult to source and process them.
The number of residential construction projects that are approved yet still unfinished is also staggering, implying the impact of the price growth on the industry.
Which Materials Are More Expensive and Scarce?
Construction price growth and housing demand are primarily driven by structural timber’s primary construction material.
In Q4 2021, the price of imported, select timber reached record-high, according to the Housing Industry Association. The increasing demand for this wood makes domestically produced timber insufficient for the growing housing construction industry.
Metal products and other elements in the supply chain are becoming increasingly volatile, making a small yet significant impact on the overall price growth. The material supply shortage will also lead to many construction projects being delayed or exceeding budget estimates.
Add that with the ever-increasing demand for housing and construction, we cannot expect that the need for timber and raw or processed materials will plateau any time soon.
Instead, the rising pressure on scarce construction materials may lead to inflation rates and higher overall renovation costs.
Should Existing Homeowners Be Concerned?
The rising costs for construction aren’t only a problem for first homeowners and builders and for existing households. That’s because established homeowners will struggle to acquire renovation materials.
Increasing building costs could also mean homeowners and builders may need to reconsider their existing insurance covers. With the rising prices, getting left behind under insurance can threaten your valuable asset – your property.
That’s why we at Plan A Mortgage recommend monitoring your sum insured and regularly checking if it will be sufficient should the worse case occur. You can do so by contacting your insurer or using a rebuild calculator from your insurer or online.
Getting the Right Finance for Your Home Project
Getting finance for your construction project can be daunting especially if building costs rise and you’re not confident with your loan.
But Plan A Mortgage got your back covered. We’ll thoroughly discuss your construction finance needs and your current financial position.
Then we’ll take you through different loan options that will be flexible enough for contingencies depending on your case and ensure that you’re signing up for an excellent rate.
Feel free to call us today, and we’ll gladly let you know how we can help you realise your 2022 dream property goals.
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