Construction Price Hikes Tipped to Climb in 2022

Construction costs across Australia are expected to keep rising next year with an industry forecast indicating they will jump by as much as almost 6 per cent.

Consultancy firm Rider Levett Bucknall has released a list of forecast construction cost hikes for capital and regional cities around the country in 2022.

According to its projections, costs will increase by 2.5 per cent in Darwin; 3 per cent in Adelaide, Melbourne and Townsville; 4.5 per cent in Perth; 5 per cent in Brisbane and Gold Coast; and 5.6 per cent in Sydney.

Throughout 2021, building material prices have increased prompting some trades to link supply rates as a condition of tender pricing and, therefore, subject to a price adjustment should the rate rise.

RLB’s New South Wales managing director Stephen Mee said upward pressure on contractor tender pricing was being experienced nationwide, albeit at differing levels.

“Melbourne, Canberra, Adelaide and Darwin have observed stable increases, generally within expectation,” he said.

“However, significant surges have been experienced in Brisbane, Perth and Sydney, with escalation forecasts for 2021 well above levels forecast at the backend of 2020.”

Mee said contractors have flagged the potential for material shortages, shipping cost increases and delays of imported goods and equipment but with pressure appearing to grow there could be further impacts to come.

“This has been most evident in Sydney where the analysis of current tender prices received in early December has resulted in revisions to the published 2021 and 2022 TPI (tender price indices) uplifts,” he said.

The uplifts published within the latest RLB International Report of 1.2 per cent and 2 per cent have been recently revised to 4.1 per cent and 5.6 per cent respectively.

“This sudden change in RLB’s escalation forecasts, highlights the current pricing volatility within the Sydney market, which is only truly reflected when project tender prices are received and reviewed,” Mee said

According to the report, construction activity metrics have nudged decade highs in Australia despite lockdowns putting an estimated $20-billion dent in the economy.

However, overall construction work across the country totalling $212 million was down slightly from $213 million in the 2020 financial year.

The fall in volume was largely due to reduced activity in Victoria—the state hardest hit by the Covid outbreak—which amounted to $2.4 billion.

Mee said the industry in both Sydney and Melbourne had adapted to various setbacks caused by total shutdowns and density restrictions on-site.