Construction costs have recently exploded, rising more than at any time since 2005.
A surge in construction activity, supply chain disruptions and a shortage of materials has already been widely reported, but an alarming new twist has emerged with an Australia-wide shortage of labour.
The number of people wanting to take up apprenticeships in trades such as electrical, plumbing, carpentry and concreting has slumped dramatically.
There is already a shortage of skilled labour in the building industry, but if that is coupled with further reductions due to the ageing workforce, it’s anticipated that labour costs alone could result in increases in construction costs of 20% to 30%.
On an annual basis, the Construction Cost Index has already increased by 8% in Queensland, but that’s just in the past year to the end of September.
According to ABS’s latest price index, timber and joinery costs rose by 5.3% in the September Quarter alone, while the cost of aluminium windows and doors increased by 7.9% and steel beams increased by 11.1%.
This isn’t a short-term spike and it’s anticipated that this construction cost inflation will continue for another 12 to 18 months.
A leading Queensland Quantity Surveyor recently indicated that their investigations have identified that more than 80% of property owners are underinsured.
While underinsurance in households can cause significant issues, it is in the commercial sector that it can be catastrophic with significant penalties imposed if they’re found to be severely underinsured.
Unfortunately, these issues only come to light when there is a significant claim, which just adds to the anxiety involved. With many businesses and households being adversely affected financially by Covid and increasing insurance costs, leading to a reluctance to increase their sums insured, the result could be catastrophic.
While Insurance Brokers are not qualified valuers, if you are concerned your insurance might not be up to scratch, please seek advice from your Broker.