This article about annual movements in construction costs and why this is important to strata insurance in Queensland has been supplied by Bradley van Xanten, UOAQ President.
The UOAQ tracks construction costs based on quarterly reports from the Australian Bureau of Statistics (ABS).
We use these reports to calculate annual movements in construction costs, then comment on their significance for our members regarding their strata insurance. This is particularly useful when comparing actual variations with the annual uplifts suggested by insurers.
Up to now we have accessed and reported on the ABS’ Building Construction Cost Index 30 (CCI 30) for Queensland.
Following representations by the UOAQ to the Macroeconomics Statistical Division of the ABS, we have been advised that CCI 30 is an aggregate index covering three classes of buildings:
- Residential – Houses
- Residential – Other Than Houses
Of these three classes, Residential – Other than Houses is the one most closely aligned to strata-type buildings, primary examples being:
- Duplex houses
- High-rise flats
- Semi-detached houses
Relevantly, the ABS separately publish a quarterly report for each class, including: Construction Costs Sub-Index 3019: Residential – Other Than Houses (CCS-I 3019)
Access to CCS-I 3019 will allow even more refined analysis by the UOAQ of what is happening with construction costs in Queensland.
The UOAQ proposes to base all future quarterly updates on CCS-I 3019.
Initial comparison of the trendline for CCI 30 with the trendline for CCS-I 3019 does show some variations between the two from quarter to quarter.
However, both trendlines confirm:
- Actual movement is less than the annual increases suggested by the insurers, with the consequential risk of over-insurance
- The older the valuation the greater the risk of over-insurance.
The UOAQ welcomes this opportunity to provide its members with even more refined analysis and commentary, tailored even more to strata-specific buildings.
This post appears in Strata News #306.
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This article has been republished with permission from the author and first appeared on the UOAQ website.