How to build more cheaply

Here’s some good news if you’re thinking about building a new home – construction costs have fallen for the first time since 2016.

According to Cotality’s Cordell Construction Cost Index, national building costs dropped by 0.5% in the June quarter. While this might not sound like much, it’s a positive sign that the residential construction sector is starting to return to normal after several years of disruption.

Ray White Group Chief Economist Nerida Conisbee said this was “the first time in eight years that we have seen a fall in construction costs” and that it could be “a turning point for the building industry”.

Over the past few years, building a home has become more expensive due to supply chain issues, labour shortages and rising material prices. Now, some of those pressures are easing.

Ms Conisbee said that “material costs are falling” and highlighted that “concrete, steel, timber, electrical and metal products have seen the largest declines”.

That said, not every cost has dropped. Labour remains tight in many areas, so tradespeople are still in high demand. But with material prices stabilising, builders now have more flexibility when quoting on jobs.

The Benefits of Modular Construction

Ms Conisbee said one potential way to build more cheaply was by using modular construction, which is when building components are manufactured in a factory and then assembled on-site.

“Modular construction can reduce building costs by 10-20% while cutting construction timeframes by up to 50% compared to traditional methods. The cost advantages stem from factory-based construction eliminating weather delays, reducing material waste through precise manufacturing, and achieving economies of scale impossible on individual construction sites,” she said.

“When components are manufactured in controlled environments, quality improves while labour costs decrease through more efficient deployment of skilled workers.

“Rather than coordinating trades across multiple sites, modular construction consolidates activities in controlled environments where workflows can be optimised, materials managed efficiently, and quality assured through standardised processes.”

If you’re planning a new build, now might be a good time to explore your options, whether modular or traditional. Lower building costs could help stretch your budget further or allow you to include features that might have been unaffordable six or 12 months ago.

Ms Conisbee forecast that “if this trend continues, we could see renewed interest in new builds, particularly from first-home buyers and upgraders”. That extra demand, if it occurred, would put upward pressure on costs, which is another good reason why it might be a good idea to take action sooner rather than later.

Thinking about building? Contact me to explore your finance options and find out what’s possible based on your budget.