The cost of building a home has edged higher again, adding to ongoing pressure in the construction sector. Since the start of the war in the Middle East, the cost of building an average house has increased by around 1%.
While that increase may appear modest, it translates to roughly $3,500 to $4,000 on a standard build. For many buyers, that is a meaningful addition, particularly when combined with previous cost increases over recent years.
Importantly, this rise is not occurring in isolation. The construction industry has already been dealing with elevated material costs, labour shortages and tight margins. A further increase, particularly one linked to fuel and transport costs, adds another layer of uncertainty.
The Housing Industry Association has warned that rising fuel-related costs could dampen demand for new housing. This is not a prediction of a sharp decline, but rather an indication that some buyers may delay or reconsider building as costs become harder to manage.
Master Builders Australia has reported that builders are facing increased expenses across a range of materials. Items such as concrete and plastic pipes have risen by between 20% and 30% in some cases. These increases can significantly affect project budgets, particularly where contracts were signed before costs escalated.
Builders operating under fixed-price contracts are especially exposed. In these arrangements, cost increases are often absorbed by the builder rather than passed on to the client. This can place considerable financial strain on businesses if margins were already tight.
Master Builders CEO Paul Bidwell has noted that some companies are reporting overall material cost increases ranging from 5% to 50%, with total build costs rising by approximately $10,000 to $15,000. These figures vary depending on location and project type, but they illustrate the scale of pressure within the sector.
The impact is visible in insolvency data. ASIC reported 3,490 construction company insolvencies in 2025. While not all are directly linked to cost increases, the data highlights ongoing fragility in the industry.
For the housing market, the key implication is supply. When building becomes more expensive or uncertain, fewer projects may proceed. This can contribute to ongoing housing shortages, particularly in areas already experiencing strong demand.
For buyers, building remains an option, but it requires careful planning. Budget contingencies, builder due diligence and realistic timelines are increasingly important. For some, the established housing market may feel like a more predictable alternative.
The overall picture is not one of collapse, but of continued pressure. Costs are rising, margins are tight, and both builders and buyers are needing to navigate a more complex environment.
