We know construction costs are going up as we are buying construction products and services every day.
A recent ANZ report provides some academic confirmation of the cost increases through the ‘three-month average value of residential consents per square metre’ which rose 12% in the year to June 17.
This measure is a proxy for construction costs and it shows that capacity pressure in the construction sector is intense with severe labour shortages. Especially high cost increases are being seen in the multi-dwelling space.
What does this mean for investors? Today is the best time to buy. We’ve been developing for 14 years and costs keep on rising. Yes, there will likely be another property slow down at some point, but good quality properties in high demand locations are not flogged off cheap because the market changes. Investors who buy the right property in the right location hold for the long term. Over time they know rents will increase, their mortgage will reduce and their property will rise in value. Patience pays.
John Kenel, Assured