While building a house this year is likely to be more expensive than it would have been last year, the “good news” is that costs are rising at a slower rate.

CoreLogic’s Cordell Construction Cost Index (CCCI), which tracks the cost to build a typical new home, returned a quarterly growth rate of 0.7% for the June quarter, the lowest rate since September 2020 and well below the 1.2% decade average.

The National CCCI rose by 8.4% over the year, which is quite high, but is an improvement on last year’s 11.9% – the largest annual rise on record.

Costs of different materials are still volatile and recording large amounts of variation, but there has been a stabilisation within products such as metal and timber prices.

Master Builders Australia Chief Economist stated: “During the June 2023 quarter, the cost of building materials increased by another 0.6 percent, the smallest quarterly increase since the end of 2020. While the slowdown in the overall cost of home-building materials is welcome, there has still been a sizeable increase of 7.4 percent over the past 12 months.

There has been a significant drop in dwelling approvals over the year which will have a flow-on effect on prices. Lower demand for construction work will reduce the pressure on material costs and labour supply. The slowdown in residential construction costs can also be seen in quarterly CPI as the costs of new owner-occupied dwelling purchases make up the largest weighting in the CPI ‘basket’.

Overall the imbalance between housing supply and demand is keeping pressure on the market and putting a floor under housing prices.