Australians are following the lead of chocolate and chip manufacturers, using shrinkflation to deal with the spiralling cost of building a new home.

Instead of super-sized ovens or high-end mixer taps, people are building slightly smaller kitchens and bathrooms, and installing cheaper whitegoods or more affordable fittings.

And, after one of the longest run-ups in construction costs in decades, there are now signs builders are finally cutting their overall prices, with discounts of up to $20,000 on new homes in Sydney and Melbourne to get prospective buyers into a new property.

The soaring cost of home construction has been one of the key drivers of inflation over the past two years. New home prices jumped by a third in Sydney and Melbourne.

The single largest expense in a new home is timber, board and joinery, accounting for 33.5 per cent of the total sticker price.

The cost of timber windows alone has soared by 65 per cent since the end of 2019. Timber doors are 50 per cent dearer, while structural timber is 40.1 per cent more expensive.



The second-largest component of a home build is metal products, accounting for almost 18 per cent of the total cost. Copper pipes and fittings have become 51.5 per cent more expensive since 2019, while prices for metal garage doors have lifted by more than 45 per cent.

Housing Industry Association chief economist Tim Reardon said the surge in timber prices was a direct result of the war in Ukraine.

Timber prices around the globe soared as key supplies out of Russia dried up.

Reardon said as more supply had come into the market, Australia was looking at a glut of timber, which should keep a lid on prices over the next 12 to 18 months.

“A large amount of timber came out of the area affected by the war, which no one was really aware of until it happened. But now we’ve got a glut coming onto the market,” he said.

Energy costs exploded due to the Russian invasion. Anything needed for a house or apartment with a large component of energy, such as steel or bricks, experienced a surge in prices.

State governments have increasingly used taxes to cover infrastructure costs associated with construction, particularly on new estates on the outskirts of our largest cities. In some cases, these taxes can account for half of the cost of building.

But these prices would not have been able to be passed on to prospective home buyers if not for strong demand.



Record low interest rates – the Reserve Bank took the cash rate to 0.1 per cent while creating more than $300 billion in quantitative easing programs – and government measures supercharged the spending ability of Australia

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Source: brisbanetimes.com.au