After a brief slowdown, construction costs in Australia are once again on the rise, reversing the trend seen last year. While the cost of building a new home surged by over 20% in the 12 months to September 2022, the growth rate had slowed to 3.9% by September 2023. However, recent data indicates a concerning resurgence in cost increases, which is impacting housing supply and affordability nationwide.

Labour shortages, particularly in finishing trades, along with year-on-year wage hikes, are primary drivers behind the rising costs. The Australian Bureau of Statistics cites strong union activity as a factor contributing to low productivity, further exacerbating expenses.

Although some building material prices, such as timber and steel, have decreased, costs for essentials like bricks, plaster, and copper continue to climb. Notably, copper prices, driven by demand from the green energy and electric vehicle sectors, are a particular concern.

These escalating construction costs are widening the price gap between new and existing homes, leading to fewer new builds and pushing up existing property prices across Australia, particularly within the residential sector.