Construction costs continue to climb from an already elevated base, rising 0.6% over the September quarter, according to Cotality's latest Cordell Construction Cost Index (CCCI).

This marks a slight uptick from the 0.5% and 0.4% growth in the previous two quarters. Over the 12 months to September, construction costs rose by 2.5%, easing from 3.2% over the same period last year.

Cotality Head of Research Eliza Owen said although overall construction costs are still high, the rate at which these costs are rising each year has slowed significantly since the pandemic.

“Over the past two years, the annual growth in home building costs has remained below the pre-COVID decade average of 4.0%.

"While underlying construction costs remain high, the rate of annual increases has not been this low since March 2002.

“Western Australia bucked the trend recording the highest quarterly increase at 1.3%, nearly double the 0.7% rise recorded in the previous quarter.

“This has pushed annual cost increases in the state to 3.6%, up from 2.8% in the year to September 2024,” she explained.

Metal leads material price hikes

The September quarter recorded broad-based increases across building materials, with metal and associated products leading the rise.

“Structural timber remained relatively stable, with only minor increases affecting select items,” said Cotality Construction Cost Estimation Manager John Bennett.

“In contrast, plasterboard and plaster products experienced price declines, particularly in South Australia and Western Australia. At the same time, the new financial year has prompted price updates from many vendors, adding to cost pressures”, he noted.

Skilled labour in demand

Labour costs also increased this September quarter, partly driven by a lift in dwelling approvals and ongoing competition for skilled trades.

Nationally, dwellings approvals rose 4.3% over the three months to August, compared to the previous quarter ending in May.

“The nearly 40% rise in cumulative costs since the pandemic continues to place sustained pressure on liquidity and project feasibility,” said Mr Bennett.

“Meanwhile, the ongoing shortage of skilled trades remains a persistent challenge of the industry. This quarter's labour cost increases also reflect the impact of annual enterprise wage agreements coming into effect.”