Inflation sparks housing supply pressure

Runaway construction costs, trade shortages and an immigration backlog point to further housing deficits, experts say.

Tying the scenario together is Australia's June quarter headline inflation jump to 6.1 per cent, the highest in two decades, according to national buyer's agent Pete Wargent.

The BuyersBuyers co-founder says the cost of renovating and building new homes has soared off the back of the federal HomeBuilder stimulus, very high demand for trades and materials, and supply shortages.

"The latest inflation figures confirm the producer price indexes for the housing construction sector are going to be very ugly," Mr Wargent said.

He estimates the cost of building new homes has surged as much as 30 per cent, with an expected lift in construction insolvencies likely to see projects mothballed or scrapped altogether.

The warning comes with high profile outfit Metricon announcing it will shed almost nine per cent of the 2500 staff it employs along Australia's east coast.

Acting chief executive Peter Langfelder says the restructure is mostly about sales and marketing rather than the core business.

However, the move follows the recent collapse of Queensland firms Condev and Probuild among others.

The Australian Bureau of Statistics says the overall price of building materials increased 12 per cent over 2021, the strongest annual rise since 1981.

According to the Master Builders Association, timber is up 39 per cent, steel 37 per cent, and supply chain disruptions are destined to persist.

Construction companies have been grappling with inflation at more than double the headline level for over a year, says chief executive Denita Wawn.

"This is being felt by consumers whose buying power to build a new home has been substantially eroded," she said.

However Mr Wargent says the pressure will inevitably extend beyond just those hoping to build.

"This has implications for a potential undersupply of dwellings as immigration increases over the next 12 months" he said.

The other consideration is that rental price inflation is only now beginning to show itself.

"The official inflation figures measure actual rents across the market rather than asking rents - which have soared over the past year - and as such there is a lag in the official data," Mr Wargent said.

Austrlaian Associated PressBack to Breaking News

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