Will soaring increases in construction costs begin to bite retirement sector?

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It was in February that Ingenia Communities signalled that building costs were rising significantly.

Now in June, timber prices have risen by 50% to 100%, steel by 30% to 60% and concrete by 20% to 40%.

There also are labour shortages and expected wage rises. Labour represents 55-60% of cost of a new home build for Ingenia.

The market is becoming extremely challenging for new builds and renovations in the sector as prices soar.

Projects stalling

Gilmore Interior Design, which specialises in retirement living and aged care, has had a number of projects put on hold until September.

“We think it’s three factors – uncertainty over the new government, funding and potential wage rises,” said Gilmore Studio Practice Manager Trina Kazi.

There are fears interest rate rises, inflation hikes in the coming year, together with a tightening of lending, will push more construction firms over the edge.

Last year about 34,000 land lots were sold in Melbourne and Geelong’s growth suburbs. The industry can only build 20,000 a year, according to Satterley Property Group CEO Nigel Satterley.