The cost of building an average new home has jumped by at least $2000 because of a spike in global steel prices in the past six months, a building industry body says.
Add to that the surge in transport costs caused by record world oil prices, coupled with 12-year high interest rates, and the country's housing problem looks set to worsen.
"The jump in the price of steel and concrete is adding further pressure to housing affordability, exacerbating problems in rental markets that are already stretched to the limit," Master Builders Association of NSW executive director Brian Seidler said.
"These price increases will also significantly impact on the recovery of the Australian housing market."
Reinforcement steel prices have shot up by more than 60 per cent in six months because steel makers like China and Taiwan have rolled back their exports to address their own domestic demand, he said.
Australian housing sector builders are now being quoted increases for reinforcement steel of $700 per tonne.
Between three and five tonnes of reinforcement steel is used to build an average single-storey, three bedroom house.
The rising cost of steel means a house this size will cost $2000 more to build now than it did six months ago.
"This doesn't even take into account the cost of other materials, like plastics and concrete, which are on the rise as a direct result of increasing oil prices," Mr Seidler said.
"We also need to consider the impact of the skills crisis, which also contributes to the cost of building a home."
He said while increasing the supply of affordable homes is part of the solution to ease the housing affordability crisis, soaring steel prices and other building materials adds yet another challenge.
"Recent interest rates increases and rising food and petrol prices have also taken their toll on investment in housing," he said.
"The housing industry is officially in the doldrums and the rapidly escalating cost of building products is going to seriously impact any chance of a speedy recovery."
