QV CostBuilder says excavation costs up 7.8% in March due to higher diesel prices - other work involving heavy equipment also facing cost pressures

Higher fuel prices are already pushing up construction, especially for tasks involving the use of heavy equipment, according to QV's CostBuilder database.

CostBuilder monitors the costs of 11,200 materials and services used by the construction industry. The latest March update recorded changes to 8300 of those since February.

Overall, average costs increased by just 0.4% during that period, however the cost of using heavy equipment increased sharply as a result of higher fuel prices.

The biggest increase was in site excavation costs, which were up a whopping 7.8%. Demolition costs rose 1.3%, piling costs were up 1.4%, site preparation up 2.0% and substructure costs up 1.8%, all due to the rising costs of diesel fuel for heavy machinery.

QV CostBuilder spokesperson and quantity surveyor Martin Bisset said fuel was currently the key driver of cost increases.

"The increase in the price of diesel has had an immediate impact on areas such as site preparation, excavation and substructure work, where fuel is a significant input for machinery used in these operations - that's where the most upward pressure on construction costs is coming from right now," Bisset said.

However he also noted that rising fuel costs were affecting supply routes and lifting freight and energy costs internationally. Although the recent spike in fuel prices was significant, their full impact on building costs was not yet clear.

"At this stage, we can see the effect at a trade and elemental level, but the impact on total building costs per square metre hasn't yet been captured," Bisset said.

"We expect to have a clearer picture of that in our next CostBuilder update," he said.

On the brighter side, Bisset said the current environment was different to the sharp and sustained cost escalations that were experienced during the Covid pandemic restrictions.

"We're not seeing the widespread supply chain disruption of recent years, but fuel and freight are certainly re-emerging as important cost drivers," he said.