Construction costs are set to soar, predicts KR Peters Director Peter Nicolls, pushed up by an imbalance in supply and demand in the building industry.



An astute market observer who has more than 45 years' experience, Mr Nicolls says construction costs will likely escalate over the next six months, adding a minimum $20,000 to the average build.



Mr Nicolls said suppliers and tradies were increasing their prices as skyrocketing demand creates shortages of both materials and skilled labour.



He said construction costs had remained stable over the past few years with suppliers hesitant to increase prices.



Now however, it was "open slather".



Mr Nicolls said the end of the Federal Government's Homebuilder scheme on 31 March will make little difference to demand as most builders were already fully booked for the next 12 to 18 months.



"There are that many pre-sales that have been made, that builders will struggle to get projects finished on time. They will struggle to get supplies and to get trades," he predicted.



"The big losers in these conditions is anyone thinking of building."



Mr Nicoll's observations are echoed by Master Builders Australia.



The peak construction organisation released figures at the start of March, which showed that in the first month of 2021 almost 10,000 loans were made to owner occupiers for the construction of a new home. This represents a gain of 20.3 per cent on December 2020.



Meanwhile, the value of home renovations lending in January 2021 was also 47.4 per cent up on the same month last year.



Mr Nicolls said the prevailing market conditions did not bode well, predicting not all builders would survive 2021.



"If you look at history, when these conditions have prevailed in the past, a major builder inevitably will collapse."



Mr Nicolls advised those wanting to build to lock in with a builder who has a solid base, and who pays for supplies and trades on time.