The cost of constructing residential property continues to increase across Australia, creating further challenges for homebuyers, builders and developers already managing higher expenses. New figures from property data group Cotality reveal that construction costs increased by 1% during the September quarter, demonstrating that the financial pressures affecting the building industry have not disappeared. Although the quarterly increase may appear relatively modest, rising costs can accumulate throughout a construction project and significantly influence the final price of a completed home. For buyers considering building rather than purchasing an established property, these increases reinforce the importance of realistic budgeting and understanding the expenses involved in delivering a new dwelling.
Western Australia recorded the largest quarterly increase in construction costs at 1.1%, while New South Wales and Queensland each experienced increases of 1%. Victoria and South Australia followed closely, with costs rising by 0.9% in both states. Cotality’s figures track changes in the price of labour, building materials, plant hire and subcontractor services across major construction trades, providing insight into the expenses influencing residential building activity. The latest results indicate that rising fuel prices are contributing to higher costs throughout the industry, particularly where materials must travel considerable distances before reaching building sites. These pressures affect builders across the country, although differences in geography, transport requirements and supply arrangements mean some states experience greater increases than others.
Cotality Cordell Costings estimation manager John Bennett says Western Australia’s higher construction cost growth is understandable given the additional expense of transporting materials from the eastern states. Many essential building products must be moved over long distances before reaching construction sites in Western Australia, making freight an important component of the final price. When fuel prices increase, suppliers and transport operators face higher operating costs that can eventually be passed through to builders and consumers. Bennett also identifies plastic piping as a product particularly exposed to changes in the petrochemical industry. Because plastic products are manufactured using petroleum-related inputs, fluctuations in energy and raw material prices can influence their production costs and ultimately the prices charged to construction businesses.
The impact of higher fuel costs extends well beyond plastic products. Bennett says some of the largest increases are occurring in materials that rely heavily on road transport, including concrete, steel and plasterboard. These products are essential to residential construction and frequently require specialised vehicles or heavy transport arrangements to reach building sites. Concrete deliveries, for example, must be carefully coordinated, while steel and plasterboard can involve substantial freight and handling requirements. Rising transport expenses therefore affect multiple stages of the building process, adding to the overall cost of completing residential projects. Builders have limited opportunities to avoid these materials, meaning increases in their prices can be difficult to absorb without adjusting construction quotes or reducing margins.
For prospective homeowners, these conditions highlight the risks associated with relying on outdated building estimates. A construction budget prepared several months before work begins may no longer accurately reflect the cost of materials, labour and associated services. Buyers considering house-and-land packages should carefully examine what is included in the advertised price, particularly where site preparation, service connections, landscaping, fixtures and other finishing costs may be excluded. Fixed-price building contracts can provide greater certainty, but purchasers should understand the conditions under which additional charges may arise. Obtaining detailed quotations and allowing an appropriate contingency can help reduce the likelihood of unexpected financial difficulties during construction. Buyers should also consider how construction delays could affect their finances, particularly if they need to continue paying rent or meet other accommodation expenses while waiting for their new home to be completed.
Higher construction expenses also have implications for developers and the broader housing market. When building costs rise faster than expected selling prices, proposed residential projects can become less financially attractive, potentially resulting in delays, redesigns or cancellations. Developers may need to increase selling prices to maintain commercial viability, creating additional affordability challenges for buyers. This becomes particularly important when governments and industry organisations are seeking to increase housing supply to accommodate population growth. Delivering additional dwellings is more difficult when construction expenses continue rising, particularly for projects intended to provide affordable housing or entry-level opportunities for first-home buyers. These pressures can also affect smaller building companies, which may have less flexibility to absorb unexpected increases in material and transport expenses.
The latest figures also reinforce the importance of evaluating new properties from a long-term financial perspective. Investors considering newly constructed dwellings must account for development costs, financing expenses and potential delays when assessing returns, while owner-occupiers need to ensure their budgets remain manageable throughout the building process. Improving construction efficiency, strengthening supply chains and reducing unnecessary development delays may help address some of the industry’s longer-term challenges. However, the September quarter results demonstrate that cost pressures remain widespread, with every major state measured recording increases. For buyers, builders and developers, careful preparation and realistic expectations remain essential as rising material, transport and construction expenses continue influencing the affordability and delivery of new Australian homes.
