Posted on 11 Sep 2008
SOARING steel and other metal prices in the June quarter have added $1678 to the cost of building an average house and will continue to hurt affordability, according to the Housing Industry Association.
For a new house worth $250,000, price increases for steel — one of the key materials — and other metals added 0.67%, or $1678, to construction costs.
HIA Victorian director Robert Harding said builders were already bracing for another round of increases, but there was "no way around" using steel in a new house and consumers were wearing the added costs.
"On the (construction) price aspect there's not much joy that we can offer," he said.
"Commodity goods are in high demand throughout the world and
Hot competition for materials and labour has put a rocket under construction prices since the start of the year. A note sent recently to industry players from OneSteel warned that steel prices would most likely rise in the second half of this year.
Steel prices have already risen more than 60% since January. In August, there was about a $200 a tonne increase in the price of specialty steel used in concrete structures, which includes columns, slabs and walls.
The global rally in oil has helped generate a 72% lift in the cost of plastic. Materials make up half the total cost of residential construction, with labour accounting for the rest.
Building unions are in the midst of enterprise bargaining agreement negotiations, and experts believe wages will probably increase between 3.5% and 4% nationally.
Rider Levett Bucknall national director Mark Lochran said this would help soften the impact of double-digit bounces in the cost of materials, but the forces of demand and supply could push up prices beyond that base.
"The underlying cost increases, including materials and labour, could be 4% to 5% per annum but when the market comes on board and people put up their margins, that is where 5% can become a larger number for subcontractors," he said.
He said subcontractors would then pass the higher margins on to the head contractor and the cost would flow to consumers. But some commercial contractors were shrinking margins and tender prices to buy business and fatten their long-term pipeline of work.
Mr Harding said government must step in to offset these increases for house buyers by reducing planning delays and cutting taxes, particularly stamp duty.
He said
