The cost of building a new home is growing faster in Canberra than anywhere else in the country as skill shortages and expensive materials push prices up.
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Housing construction costs in the ACT jumped 2.6 per cent in the December quarter, driving the annual increase to 13.3 per cent, more than three times the national average of 4.1 per cent.
The Australian Bureau of Statistics said the price increases were being driven by persistent skills shortages and increasingly costly materials.
Demand for new housing surged earlier this decade but this coincided with severe disruptions to the supply of labour and materials caused by the pandemic and other international events, forcing prices to jump and causing a big backlog of work to accumulate.
These effects have been exacerbated over the past 18 months by surging inflation and rising interest rates, resulting in the rate of building approvals plummeting to their lowest point in more than a decade, deepening the housing shortage.
But Housing Industry Association senior economist Tom Devitt said the pipeline of new home projects, which had reached around 100,000 dwellings in recent years, has "started to shrink quite rapidly".
Mr Devitt 2024 was likely to be the trough in new building work, and a strengthening supply of skilled workers and falling materials costs would boost activity from later this year.
"2023 was a very weak year for this industry," the economist said, pointing out that there were just 51,570 loans issued for the construction or purchase of new homes last year.
"The ABS has been collecting data on lending for new homes since 2002, and [this] data shows the lowest number of these loans being issued on record," Mr Devitt said.
While housing is a significant source of inflation in the economy, there is growing evidence that cost pressures elsewhere are easing.
As the Reserve Bank of Australia prepares for its first interest rate meeting of the year, Australian Bureau of Statistics figures show wholesale prices grew 0.9 per cent in the December quarter, half the rate of the previous quarter, taking the annual rate to 4.1 per cent.
While construction costs (up 1.9 per cent in the December quarter) and imports of cars and car parts helped drive up producer prices, cheaper goods and the slowing cost increases for energy, transport and and raw materials are helping lower producer expenses, holding out the prospect of lower prices for consumers.
Cheaper meat, dairy products and steel helped drive inputs costs for manufacturers in the December quarter down to be 2 per cent less than a year earlier, and prices of their final products are growing at an annual rate of just 1.2 per cent, a three-year low.
Similar dynamics are also helping slow services costs.
The cost of accommodation services grew by 4.6 per cent in the December quarter, which the ABS said was the smallest since increase in 10 years, and the annual rise was just 0.1 per cent.
And while volatile fuel prices helped drive road freight costs up by 5.5 per cent last quarter, shipping costs fell 9.2 per cent and are down a massive 31 per cent from a year earlier.
Mounting evidence that inflation is slowing has convinced markets and economists that interest rates have peaked and the Reserve Bank board will leave its official cash rate on hold when it meets on February 5 and 6.
But views are mixed on when borrowers can expect to see rates begin to come down.
Market Economics managing director Stephen Koukoulas said the case for a rate cut "will be established" by the time of the RBA's meeting in mid-March, but the more probable move would be in May.
Deustche Bank chief economist Phil O'Donaghoe agrees that a May rate move is a "material possibility".
AMP Investors chief economist Shane Oliver tips the central bank will begin to ease monetary policy a month later, in June.
Many analysts, though, think the RBA will move more cautiously and hold off on any rate cuts until the second half of the year, among them Westpac, Commonwealth Bank and ANZ economists.
And some, including EY chief economist Cherelle Murphy and HSBC chief economist Paul Bloxham, forecast the central bank will delay any easing until 2025.