Sydney building costs

[Ross]

Interesting article on pg 59 of the Fin Review today discussing housing shortages across the country (by Macromonitor) . It goes on to say they expect the rate cycle to turn by mid 2009 and that constructions could pick up by 20% soon after. This in turn could re-ignite inflation.
My question is for those currently developing or plan to soon develop. Do you see construction costs remaining relatively stable over the next couple of years of are there already signs of increases ? I know Perth saw costs increasing at around 1% per month not that long ago.
While I'm sitting on the fence at the moment to see how the rate cycle pans out, a concern is that the cost to do a major reno on my PPOR could be notably higher if I am to wait a couple years

Thoughts ?

Ross

 

[Muffinman]

Ross, contruction has slowed in many areas and from speaking with many developers just this week they have decided to put every thing on hold.
Nothing is selling with many having to cut 10% off and talking about cutting another 5% just to off load.
Construction material costs are going through the roof with increases of over 50% for steel and another 15%-20% again due at the end of this month.
Australia has really done the wrong thing by China and now we are paying the price just as they said we would.
Timber costs have risen 25% and with fuel price increases this will make construction even more costly.

We currently have some large contracts for United/Ergon and many have been put on hold due to the increase in material costs as they have gone well over budget.
Last month I calculated the saving if they were to bulk purchase materials on one contract now they would save $90k with the expected price rises .
This month they decided to order and the saving would have been 180k. Now they are going back to the drawing board as more increases are due at the end of this month.