What construction cost trends mean for homebuyers in 2026

Building a new house in Australia now costs an average of $474,939, up 37.5% since 2019–20. Construction inflation has cooled since the 2022 peak, but build costs have not gone backwards. Homes are still getting more expensive to build, just at a slower pace.

Market conditions are more stable than they were in 2022 and 2023. Quotes are becoming more available, build times have improved, and approvals are rising again. The main cost risks identified in the data are trade shortages, builder insolvencies and tighter lending conditions. Contract terms also matter, with variations, provisional sums and prime-cost items still able to push final costs above the original quote.

Are building costs increasing in 2026?

Building costs rose after 2020, and the increase has not reversed. The ABS Producer Price Index shows house construction prices rose 40.8% between September 2020 and June 2024. Annual growth has slowed since then, but prices are still moving higher.

By March 2026, house construction prices were up 4.1% year-on-year. Input prices, which measure the materials and labour builders pay for, rose 2.5% over the same period.

There are two useful ways to read the data. The CPI measure tracks what homeowners pay for new dwellings, excluding land, and rose 4.5% in the year to March 2026. The ABS Producer Price Index tracks what builders receive for new house construction, making it a better guide to industry cost pressure. That rose 4.1%. Both measures are still increasing. Neither shows costs falling.

Key building materials: how much they changed in the year to March 2026

Material inflation has cooled since the pandemic peak, but not every input has moved in the same direction. Electrical equipment and other metal products rose 6.3% and 3.4% respectively over the year to March 2026. Copper-related products, including pipes, fittings, cable and conduit, recorded notable quarterly increases. Concrete, cement and sand remain elevated. Timber, board and joinery prices fell 0.2% in the March 2026 quarter, but remained 2.8% higher over the year.

Source: Australian Bureau of Statistics, Producer Price Indexes, March 2026 (Cat. 6427.0).

New home starts are rising, but completions are still lagging

Australia's housing pipeline is improving, but the increase has not yet flowed through to finished homes. New dwelling approvals reached 17,363 in April 2026, up 10.2% on the same month a year earlier. This is the ABS trend estimate, which smooths month-to-month volatility; the seasonally adjusted figure for the same month was 16,710, reflecting a 3.4% monthly fall after a strong March.

Commencements also rose, with 53,567 homes starting construction in the December quarter of 2025, up 8.0% on the previous quarter.

Since the National Housing Accord began in mid-2024, 219,000 new homes have been completed over five quarters, while real building costs have fallen 0.9% compared with the period immediately before the Accord.

The bottleneck is completions. Only 43,536 homes were finished in the December quarter of 2025, down 3.9% year-on-year. More homes are entering the construction pipeline than leaving it as completed dwellings. Until completions rise, finished housing supply will continue to lag demand.

National Housing Accord: when each state is expected to meet its building target

The National Housing Accord aims to deliver 1.2 million new homes by 2029, but progress is uneven across Australia. Current projections suggest some states are broadly on track, while others are projected to miss the target by a wider margin.

Source: National Housing Supply and Affordability Council, Quarterly Report, March 2026.

Build times are longer than before the pandemic

The average new house took about nine-and-a-half months to build in 2024–25, or 3.07 quarters. That is an improvement on the 2023–24 peak of 3.47 quarters, but still 38% longer than the pre-pandemic average of around seven months, or 2.22 quarters.

Longer build times can add costs that are not included in the original building quote, depending on the buyer's housing and finance arrangements. Those costs include:

• rent paid while waiting to move into the new home
• interest charged on the construction loan during the build
• longer exposure to price increases while the project is still running

Construction employment and job advertisements in Australia, 2026

Employment levels and job advertisement trends for the construction sector.

Source: Jobs and Skills Australia, Labour Force Trending, February 2026; Jobs and Skills Australia, Internet Vacancy Index, April 2026.

Construction employment reached 1,371,500 in February 2026, the highest on record. However, labour-market pressure remains elevated, with construction job advertisements still running 25% above the 2019 average. Infrastructure Australia has identified $242 billion worth of major public infrastructure projects planned or underway over the next five years, including roads, hospitals, stadiums and energy projects. These projects may compete with residential construction for some skilled trades, depending on location and trade type.

There is also a delay between when a build is approved and when it actually starts. In 2024–25, that gap was 10 weeks or 0.76 quarters on average, compared with 0.68 to 0.71 quarters before the pandemic. It is a smaller gap than the increase in build times, but it still adds weeks before work begins. As an illustration, someone paying $500 per week in rent during a 14-month build faces roughly $30,000 in extra housing costs that will never appear in the builder's quote. Actual costs will vary depending on rent, loan size and interest rate.

Fixed-price building contracts can still include extra costs

Fixed-price building contracts can still change because many residential contracts include allowances, provisional sums and variation clauses that allow some costs to be adjusted during construction.

Most residential building contracts are described as "fixed-price". In practice, many contracts do not lock in every possible cost. Some include clauses that allow the builder to pass certain extra costs on to the client. Three common contract items can increase the final build price: prime cost items, provisional sums and statutory variations.

In 2024–25, 2,361 construction businesses filed initial external administrator reports, which is the first formal step when a business can no longer pay its debts. This was roughly one in four of all such reports filed by businesses in Australia that year, the highest share of any industry.

Build times are also still running 38% longer than before the pandemic. In this environment, building contract terms can have a larger effect on the final cost paid by the client.

Source: Standard residential building contract terms. Specific clauses vary by state and contract type.

If a builder goes bust mid-project, the client is left with an unfinished home. Getting a new builder to finish the job typically costs more, and any deposits already paid may be lost. Common pre-contract verification steps include:

• Check the builder's licence is current and valid
• Confirm the builder holds home warranty insurance
• Review recently completed projects

Which states have the fastest-rising building costs?

Tasmania recorded the highest building cost increases of any state, at +8.8% in the year to March 2026, followed by Western Australia at +6.3%. High costs and high demand are not always happening in the same place. Western Australia recorded both above-average house construction cost growth and strong population growth, while Queensland recorded strong population growth but below-average house construction cost growth in the ABS PPI data.

Even within Queensland and Western Australia, there are differences between cities and regional areas.

In Queensland, the Olympics-related building work is mainly in South East Queensland — Brisbane, the Gold Coast and the Sunshine Coast. That is where competition for tradespeople is highest. In regional Queensland towns such as Townsville and Cairns, the pressure comes from defence and resources projects, and building costs in some of those areas are rising faster than the state average.

In Western Australia, large mining and energy projects in the Pilbara region and the north-west draw workers away from Perth through fly-in, fly-out arrangements. This pulls tradespeople out of the Perth housing market for extended periods, which affects pricing and availability across the whole state.

Building vs buying: which is cheaper in 2026?

Using national land, build-cost and established-home price measures, the estimated land-and-build cost has been lower than the established-home price measure each year since 2015. In 2025, the size of the gap depends on the land-price measure used.

The comparison combines a national land-price measure with the ABS average cost to build a new house, then compares that estimate with the ABS mean residential dwelling price. In the March quarter of 2026, the mean price of a residential dwelling in Australia was $1.111 million. The average cost to build a new house was $474,939 in 2024–25, excluding land. Land costs vary significantly by location, so the final land-and-build total cannot be represented by a single like-for-like national figure.

The gap needs careful reading. New land is often located 30 to 50 kilometres from the city centre, in outer suburban estates. Established homes are spread across inner and middle suburbs, where schools, public transport, shops and services are already in place. Part of the price difference is therefore a location difference, not just a build-cost difference.

Note: the established-home figure is a national mean dwelling price, while the land-and-build estimate uses a national land-price measure combined with an average build cost. These are not directly comparable measures, so the comparison should be read as an indicative national estimate rather than a like-for-like price comparison.

Stamp duty is often lower when tax applies to land only

Building can have a clear stamp duty advantage when land is purchased separately, and the home is built later. In that case, stamp duty is usually charged on the land value rather than the full completed property value. In New South Wales, that difference is roughly $33,000. Stamp duty on a typical Sydney block is about $24,800, compared with about $57,880 on a median established home at $1.325 million. First-home buyers may also be eligible for state grants. Queensland offers a first home owner grant of up to $30,000 for eligible new homes, subject to eligibility rules and property value caps, while South Australia offers up to $15,000 for eligible first home owners buying or building a new home, subject to eligibility and residency requirements.

Source: ABS Total Value of Dwellings; Revenue NSW stamp duty calculator.

One cost that rarely appears in comparisons is the cost of continuing to pay rent while waiting for a build to finish.

For example, someone paying $500 per week in rent during a 14-month build would spend roughly $30,000 to $50,000 in extra housing costs before moving in. Actual costs depend on rent amount, loan size and interest rate. In markets where building is only slightly cheaper than buying, such as Tasmania and Darwin, these extra costs can make building the more expensive option overall.

Average apartment construction value is up 50% since 2020 in NSW, Victoria and Queensland

Across NSW, Victoria and Queensland, the average construction value per completed apartment rose 50.6% between 2019–20 and 2024–25, reaching $567,947. This is a derived average based on ABS Building Activity construction value and completion data, not a direct apartment price index.

Despite this, the total value of apartment construction completed in 2024–25 was $20.7 billion, which is still below the 2017 peak of $21.2 billion, even though Australia's population has grown since then.

Source: ABS, Building Activity, Australia, 2024–25 (annual); HIA and Centre for International Economics, Taxation of the Housing Sector, 2025.

Two factors are contributing to lower apartment construction activity.

Build costs are high. Mid-rise apartments often cost more per dwelling than the average suggests because the build includes shared spaces, lifts, fire safety systems and car parking. A 2025 independent housing feasibility review by the Centre for International Economics and HIA, Taxation of the Housing Sector, found that mid-rise apartment development could not achieve a standard profit margin in any Australian capital city at current prices.

Developers also usually need to sell a large share of apartments before a bank will release construction finance. This is known as a pre-sales requirement and is typically set at 60% to 80% of all units. With interest rates high and buyers more cautious about committing to a home that may be 18 months away, many projects are struggling to reach that threshold. When fewer projects meet pre-sales requirements, fewer projects move into construction.

How borrowing conditions have changed since 2020

Higher interest rates have made new builds harder to finance. In the March quarter of 2026, the number of new home loans taken out by owner-occupiers fell 6.9% compared with the previous quarter. The total value of those loans fell 4.3% over the same period. This covers new lending only and does not include refinancing.

The RBA cut the cash rate to a pandemic low of 0.10% in 2020, then raised it sharply from May 2022, reaching a peak of 4.35% in November 2023. Three cuts followed in 2025, lowering the rate to 3.60% by August. Inflation then picked up materially in the second half of 2025, and the RBA responded with three consecutive hikes in February, March and May 2026, returning the cash rate to 4.35% by May 2026. Most mortgage rates have moved broadly in line with this path.

The loan itself also needs to be larger. The average build cost has risen $129,529 since 2019–20. With APRA's 3 percentage point serviceability buffer, a borrower with a mortgage rate of 6.3% to 7.0% may be assessed at 9.3% to 10.0%. That assessment rate reduces the amount a lender will approve, independent of whether the actual rate seems affordable.

What the data shows about building conditions in 2026

New home approvals are up 10.2%, and construction starts rose 8.0% in the December quarter. Build times have improved from their 2023–24 peak, although they remain above pre-pandemic levels.

The data cited for 2026 shows building costs were still rising, prices remained above pre-pandemic levels, and borrowing conditions were still tighter than in 2020. The costs most likely to affect project budgets are provisional sum items that exceed estimates, extended build timelines that add months of rent, and the financial exposure that comes with builder insolvency.

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