Building a new home continues to become more expensive, with the latest figures confirming that construction cost pressures remain firmly in place.
Data released by the Australian Bureau of Statistics shows prices for detached house construction increased again in the December 2025 quarter.
The Producer Price Index indicates construction costs rose by 1.1% over the quarter, marking the second-highest quarterly increase in more than two years. While the pace of growth has eased from pandemic-era peaks, costs remain well above historical norms.
Looking at the longer-term trend, the scale of the increase is stark. Since December 2019, construction costs have climbed by 37.5%. This sustained escalation has materially altered feasibility calculations for developers and made new housing supply harder to deliver at affordable price points.
Cost pressures are not evenly distributed across the country. South Australia recorded the largest quarterly increase at 2.4%, followed by Queensland and Western Australia, both up by 2%. These state-based variations reflect differences in labour availability, material sourcing, and local demand conditions.
The December quarter increases were largely driven by higher prices for raw materials used in manufactured construction products. Terracotta tiles recorded one of the sharpest rises, up by 5.9%. Timber, board, and joinery costs increased by 0.4%, contributing to a 4.2% rise in fencing and gate prices.
Cement products also became more expensive, rising by 1.6% over the quarter. Concrete tiles in particular recorded a 2.7% increase. These materials form the backbone of residential construction, meaning even modest percentage rises can significantly affect total build costs.
Analysis from Altus Group highlights the role of energy prices in pushing costs higher. Head of Development Advisory Niall McSweeney explains that electricity costs feed directly into the production of construction materials. When energy prices rise, the embedded cost of everything from bricks to concrete increases alongside them.
This dynamic has important implications for housing supply. Elevated construction costs discourage new projects, particularly in lower-margin segments. As a result, fewer dwellings are being delivered, reinforcing the supply shortages already evident across the established housing market.
For buyers and investors, rising build costs are another factor supporting existing property values. Replacement costs are climbing, which places a higher floor under established housing prices. While new construction remains essential, the economics are becoming increasingly challenging without further productivity gains or cost relief.
