Construction prices set to increase as steel prices soar

Consumers should expect to pay more to build their own homes as price spikes in building materials continue to drive up the cost of building, according to the Master Builders Association of NSW (MBA NSW), which revealed that the volatility of the global price of steel over the last six months will continue throughout 2008.

 

“The jump in the price of steel and concrete is adding further pressure to housing affordability and exacerbating problems in rental markets that are already stretched to the limit. These price increases will also significantly impact on the recovery of the Australian housing market,” said Brian Seidler, executive director of MBA NSW. 

 

“Hikes in transport costs because of rising oil prices are also adding to these pressures.”

 

Seidler added that it’s been “clear for some time that Australia is facing a housing affordability crisis”, and that everyone has a different perspective on what can be done to address the critical shortfall in housing.

 

“Increasing the supply of affordable homes is one part of the solution, but the soaring price of steel and other building materials adds another challenge to the delivery of affordable homes,” he said.

 

“Reinforcement steel prices have shot up by more than 60% in six months – and it appears that there’ll be more increases to come.”   

 

Builders are being quoted increases for reinforcement steel of around $700 per tonne, according to Seidler, which means that the three to five tonnes of reinforcement steel required to build an average single storey, three-bedroom house will cost $2,000–3,500 more now than it did six months ago.

 

“This doesn’t even take into account the cost of other materials like plastics and concrete, which areon the rise as a direct result of increasing oil prices. We also need to consider the impact of the skills crisis, which also contributes to the cost ofbuilding a home,” Seidler said.

 

The housing industry is “officially in the doldrums”, he said, and the rapidly escalating cost of building products is going to “seriously impact any chance of a speedy recovery”.

 

According to leading steel supplier OneSteel, price volatility in the market will continue throughout 2008. The price increases are linked to the global dynamics of the steel industry, including steel-producing countries such as China and Taiwan rolling back exports to help address domestic demand.