The latest CoreLogic residential construction costs report (CHIP March quarter) out today confirmed costs associated with housing construction continued to rise over the first quarter of 2020 https://www.corelogic.com.au/reports/cordell-building-indices-chip-report
The National CHIP Index rose by 1.0% over the three months to March 2020, and 3.6% year on year. Over the previous quarter, growth in the CHIP index was slightly lower at 0.9%. Meanwhile, the most recent figures show the national CPI increased by 0.7% over the December 2019 quarter, compared to a rise of 0.5% over the previous quarter.
COVID 19 will likely have some influence on the movement in the CHIP index due to factors such as the availability of labour, and price of materials. At this stage it is a little too early to see what impact it will have, but it is more likely to be a deflationary movement, as a surplus of labour becomes available while the commencement of new projects slows. The most recent ABS data (trend series) shows total dwelling approval figures increased by 1.0% in February, while employment in the construction industry grew 0.2% over the three months to
Construction currently accounts for around 9.1% of the total workforce. The ABS have noted on both the building approvals and labour force datasets that they are currently monitoring for potential impacts from the coronavirus so again this will be something to watch.
CoreLogic’s home value index released in April saw national dwelling values rise by 0.7% over the month of March. It is worth noting the second half of the month experienced weakening in the growth trend as confidence slumped and social distancing polices took effect.
Key findings Q1 CHIP Report
- The National CHIP Index rose by 1.0% over the three months to March 2020, to be 3.6% higher over the year. Growth in the national CHIP index over the previous quarter was slightly lower at 0.9%.
- The NSW CHIP Index increased by 0.9% over the March 2020 quarter, after increasing by 0.8% in the December quarter.
- The CHIP index for Victoria rose by 1.0% over the March quarter of 2020 after the previous quarter recorded a growth rate of 0.8% .
- Queensland continues to report the highest CHIP index at 312.0. Quarterly and annual growth in the Qld CHIP index was the highest of all states, rising by 1.1% over the three months to March 2020.
- The CHIP index for WA increased by 1.0% over the 3 months to March, up from 0.7% over the December 2019 quarter.
- South Australia continues to report the lowest CHIP Index at 271.8. Quarterly growth in the SA CHIP Index was recorded at 1.0% over the three months to March, up from 0.7% over the previous quarter.