WHY ARE NEW HOMES SO EXPENSIVE?

The cost of building  has increased over the past 5 years making new homes expensive. It’s not the bricks themselves that are worth more, it’s the labour that turns them into houses that we are paying for.

SCARCITY AND THE HOUSING BOOM

Australia is in a construction boom at the moment. As a young country, we don’t have an oversupply of housing. As a growing nation, we need more places to live in. So, what is driving our economy at the moment? It is construction. This is easy to see in Sydney, where so many high rises and apartment complexes are shooting up around the rail network – especially in areas that have been predominantly industrial up until recently.

TRADESPEOPLE ARE IN DEMAND

This increase in construction has caused greater demand for tradespeople. Greater demand means tradies are able to charge more. There is more large-scale work available for them in all of the complexes being built – meaning, they will often charge more for small scale jobs such as household renovations.

EFFECT ON MARKET

An increase in new developments will have a positive effect on existing properties. Older dwellings will appear as better value against more expensive, newly built ones. This will increase competition for older properties which will drive up value, which will, in turn, push up the value of new dwellings too.

How has the rising cost of construction impacted your investing? Please share your experiences in the comments section below.

 

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