Queensland homes may be heavily underinsured because of the property boom and soaring building costs with owners urged to immediately review their policies, industry experts warn.
In addition to an almost six per cent rise in the median Brisbane house price year-on-year, the cost of new builds has risen dramatically.
Master Builder’s deputy CEO Paul Bidwell says there has been a five to 10 per cent increase in building costs over the past six months and that could easily hit 15 per cent by December.
A shortage in supply of key construction materials, especially timber, has caused a supply-demand issue that has driven up the cost of a new build as well as increases in wages, he said.
One Queensland supplier raised the cost of pine framing by 5.7 per cent in March and it will rise another 15 per cent in June, Mr Bidwell said.
“There is a global shortage of timber and that’s probably the biggest one driving price increases”, Mr Bidwell said
“A five to 10 per cent increase over the past six in the cost of building a new home is a lot and that could be seen as an optimistic view and possibly be as much as 15 per cent. Who knows where this will end.
“The sensible thing to do for homeowners is to review their insurance policy to make sure they are covered for the cost of a replacement home.”
Besides a shortage of specific construction materials, there were Canadian supply constraints, extremely high freight costs and import challenges because of a shortage of containers and freight routes, he said.
Insurance Council of Australia says other factors needed to be factored into any destroyed home that needs to be replaced including debris removal, temporary accommodation and the submission of DA’s.
“You need to insure for how much it would be to rebuild and you need to factor in debris removal according to the block that you are,” said ICA spokeswoman Lisa Kable.
“So debris removable on a battle-axe would cost more than someone who has a street frontage.
“You should review it every year but absolutely this year if real estate in your area has gone through the roof.”
The ICA has an insurance calculator as do many insurance companies including Allianz and Suncorp.
Suncorp’s head of insurance Paige Vincent said their calculations regularly updated to include rising building costs while insured sums were annually adjusted in line with inflation.
“The online calculator uses extensive building industry data to estimate rebuilding costs and considers the specific information provided by the customer to determine typical building replacement costs at today’s prices using new materials,” Ms Vincent said.
“On renewal, we will also automatically adjust the sum insured to account for various factors including inflationary trends, however, we still recommend customers consider if the sum insured is appropriate for their situation.”
An Allianz spokesman said all homeowners should regularly review their policy and not just when it comes up for renewal.
“We especially recommend Australians regularly review their home and contents insurance in light of the increasing impact of natural catastrophes and perils over the past five years, as well as an increase to the cost of rebuilding and repairs,” they said.