The cost of building a new home in Australia is rising at record speed, the latest data shows.

Releasing the March quarter edition of its Construction Cost Index Report, property information services firm CoreLogic says the average cost to build freestanding, semi-detached and two storey homes rose by 2.4 percent during the March quarter to be up by 9 percent over the twelve months to March.

This represents the highest rate of growth recorded in the index’s history exception for a 10.2 percent growth spurt over the twelve months to March 2001 following the introduction of the GST.

Leading the way is South Australia, where the index rose by 2.5 percent for the quarter and by 9.8 percent over the twelve months to March.

This was followed by Western Australia (up 2.4 percent/9.5 percent for the quarter/year to March), New South Wales and Victoria (2.4 percent/8.8 percent each) and Queensland (2.2 percent/8.7 percent).

CoreLogic Construction Cost Estimation Manager, John Bennett, says timber, metals and imported products are driving much of the growth.

“Timber costs continue to rise, with cladding, decking and other timber items affected,” Bennett said.

“Steep rises in metal prices are also now flowing through to the market, with structural steel, fixings and metal components hit hard.

“We continued to see volatility in the rest of the market, with imported products the most vulnerable due to elevated shipping costs. Rising fuel costs are also on the radar and we have continued to see further increases in the cost of other materials.”

CoreLogic Research Director Tim Lawless says construction cost growth is adding further uncertainty to new building projects and renovations as well as inflationary pressures to the economy.

While the most obvious impact lies with builders, new home buyers and home renovators, Lawless says another consideration lies with the sum insured by homeowners.

With construction costs up more than 25 percent over the past five years, homeowners will need to reassess their insurance terms and make sure they are adequately covered should they need to make a claim.

Going forward, Lawless expects further growth in costs.

“Considering the record number of houses approved for construction during the HomeBuilder grant along with additional rebuild and repair work from the recent floods, demand for construction materials is likely to remain high,” Lawless said.

“At the same time, supply side challenges persist.

“A shortage of key materials such as structural timbers and metal products along with higher fuel costs, and labour shortages, is likely to keep upwards pressure on building costs for some time yet.”