“According to the national CCCI, residential construction costs increased by 11.0% over the 12 months to September, exceeding the 10% annual rise recorded over the 12 months ending June 2022.” (Core Logic)

Australia has seen the fastest increase in construction costs in twenty years

In our recent post, we highlighted the many ways it is possible to save money when you renovate. With the news of property price drops in many areas of the east coast, property owners (and in particular, sellers) are getting understandably nervous about how much they invest in their property and the return on investment when they sell. Although we have some control over what we spend on materials when we renovate, construction costs such as labour, fuel, and energy are trickier to curb.

Renovated properties hold their value, but at what point do rising construction costs make the decision untenable? 

And why are we paying so much more? 

Our shortage of labour is the first problem – not helped by the shut-down of our borders and construction sites during the pandemic. Add that to the increasing costs of materials and supply constraints and the result creates a dire situation for property owners. Although the current government is looking at ways to rectify the supply and demand problem - by implementing incentives to lure migrants and young people back on the tools - the backlog created by COVID lockdowns and extreme weather events, increasing inflation, and the cost of fuel and other energy sources, continue to hinder the industry, leaving them no choice but to pass on the extra costs. 

“A shortage of labour and more expensive overheads continue to have a bearing on the industry and its impact on the residential construction industry has not been lost with ongoing delays to completion times and a blowout to builders holding costs during a period of market change.” (Core Logic)

So how can property owners get around these increasing construction costs?

Fortunately, there are ways around the problem, and we've listed some of them below: 

1. Switch to cheaper materials. Sounds obvious, I know, but sometimes we must put aside our design aspirations and settle for what works within the parameters of our budget. “Get the most bang for your buck by spending more on statement items, such as quartz countertops or a statement stove, but reserve funds in other less impactful areas,” advises Mandi Johnson from A Beautiful Mess.
2. Make sure your building insurance is up to date. Most of us are underinsured, and with extreme weather events on the rise, none of us wants to get caught out in the middle of a construction industry crisis. It makes sense to take another look at whether your building insurance is in line with inflation. 
3. Shop around. Get comparable quotes for both your labour and materials and make sure that your builder or tradesperson is registered. In a difficult market with a shortage of labour, some people will take advantage of desperate property owners.
4. Enter a fixed-price building contract with your builder or trades. If you are taking out a loan to cover your renovation, most banks demand these for a reason. No one wants to pay more than they budgeted for and a reputable builder should include a margin for any increase in costs to materials or unforeseen circumstances.
5. Do the easy jobs yourself. Take responsibility for jobs you can do, like demolition, painting, and landscaping. Let the professionals handle the rest.
6. Recycle, recycle, recycle. This makes financial and environmental sense. When we renovated our home, we recycled some of our old kitchen cabinets for use in our new laundry. Obvious places to repurpose are using reclaimed timber for floors and doors. Check out your local tip (now known as recycling and resource centres) or specialty timber suppliers. Renovators often sell excess building materials online, so keep an eye on your local marketplace for bargains. 
7. Consider a makeover rather than a full-blown renovation. Renovating mindfully saves money and is an interior design trend for 2023. Ways to do this include painting existing kitchen cabinets or tiles and resurfacing baths and sinks. 
8. Stick to the original layout. This will help you avoid additional labour and material costs.
9. Build sustainably. If you have the budget, this approach will save you money in the long term.
10. Make yourself available during the renovation. Mistakes cost money. I was the owner builder for our renovation and fortunately, I was on-site when our carpenter ignored our architect's specification to use metal wall ties to hold down the framework of our new walls. Unfortunately, I wasn’t so lucky when the plumber installed our laundry sink the wrong way.
11. Don’t put undue pressure on yourself. Give yourself time to prepare for the work and even if you feel under pressure during the construction, don’t rush important decisions.

Smart decisions ensure you enjoy the fruits of your labour

Selling in a buyer's market can be a challenge, but if you are renovating to sell or update an investment property, it is important you are aware of the dangers of overspending or over-extending yourself financially. When you are renovating your own home, it is easy to get caught up in the latest interior design trends and must-haves and frustrating when everything seems to cost so much more than you anticipated. Hopefully, our ideas above inspire you to make smarter choices so you enjoy the fruits of your labour.

Listing Loop is a marketplace for off-market and pre-market properties for sale but we’re also an end-to-end property transaction platform helping to remove friction from the buying, financing, and selling processes.

If you are looking to sell your property, Listing Loop provides three options instead of the traditional one way.

If you would like to use the proven and most common method of selling with an agent, but don’t know where to start, our free Seller Assist service can help. Seller Assist identifies the best local agent to sell your property who will value your property correctly so you don’t undersell.

If you’re up for giving it a go yourself, Listing Loop can guide you through the process of selling privately. This includes listing your property for sale on Listing Loop and the option to have marketing products such as a For Sale signboard and a property brochure.

If you’re interested in selling, but not ready to fully commit, you can Test the Market for free. List your property unofficially to determine buyer interest. You can do this without even revealing your address or contact information.

Explore Listing Loop’s options for selling and importantly, list and sell your property with confidence.