The cost and price of construction throughout Australia is rising faster than ever before, the latest data shows.

Published by the Australian Bureau of Statistics, the March quarter Producer Price Index report shows that overall prices for building construction rose by 2.9 percent during the March quarter and are up by 10.1 percent for the year to March.

At this level, prices are rising at their fastest pace on record since the ABS began the data serious in 1996.

Leading the way was the detached house segment, where output prices rose by 4.9 percent and 15 percent for the year to March.

Meanwhile, prices for multi-residential construction and commercial/non-residential building construction have increased by 1.8 percent/7.1 percent and 2.0 percent/8.1 percent over the March quarter/year to March respectively.

In the heavy industry and civil sector, meanwhile, prices for heavy and civil engineering rose by 2.3 percent over the quarter and 7.8 percent over the year to March.

Not surprisingly, the increases are being driven by labour and material shortages.

These, in turn, have been caused by supply chain disruptions along with record levels of activity in detached home building and public infrastructure construction.

In its report, the ABS attributed the surge in detached house construction prices to freight costs along with a shortage of timber, metals and tradespeople.

Meanwhile, price increases in multi-residential and non-residential construction have been driven by rising labour costs and higher costs for steel, concrete and reinforcement along with a rise in project tendering activity.

In heavy and civil engineering, meanwhile, prices are rising due to higher costs for steel and crude oil driven by increased freight prices, production disruptions, supply chain restrictions, raw material cost increases and strong global demand.

On costs, the ABS says the cost of inputs to the detached house construction industry rose by 4.2 percent for the quarter and 15.4 percent for the year (the ABS does not provide cost data for either non-residential or civil construction).

On specific products:

• Steel prices have surged by 11.9 percent over the quarter or 42.1 percent over the year amid significant cost increases for steel beams and sections along with reinforcing steel.
• Prices for timber, board and joinery are up by 4.03 percent for the quarter and 20.6 percent of the year amid a surge in prices for structural timber and plywood and board (39.3 percent and 29.8 percent respectively along with strong price increases for timber doors and windows.
• Other metal prices have risen by 4.01 percent for the quarter and 16.8 percent for the year on the back of strong increases in copper pipes, aluminum windows and doors, and metal roofing and guttering.
• Plumbing products and fittings have risen by 4.41 percent during the quarter and 11.48 percent year-on-year amid strong increase in plastic pipes and fittings.
• Prices of electric equipment have risen by 3.22 percent for the quarter or 13.87 percent for the year amid a 27 percent surge in electric cable and conduit prices.
• Prices have also risen strongly for mirrors and glass, insulation, carpet and floor coverings and paint.

The latest cost increases are placing immense pressure on builders – many of whom are on fixed price contracts and must therefore wear the rising cost of materials into their margins.

At the larger end of the scale, the past month construction giants Probuild and Condev have entered into insolvency.

At the smaller home building end, Torquay home builder Anthony Lococ, who ran his Loco Build for the past seven years and had seven staff, decided to close his business last week after two years as the cost and availability of materials and trades were continually blowing out and eating into ‘anything that even looked like a profit margin.’