Soaring fuel prices are pushing up the cost of transporting construction materials, making it more expensive to build and renovate homes and piling pressure on the Albanese government’s pledge to build 1.2 million homes by the end of the decade.
Materials requiring large trucks for transport – including plastic piping, steel and plasterboard – led the 1 per cent reacceleration of building material costs during the September quarter as global oil prices continued to surge as a result of the conflict in the Middle East, Cotality’s latest Cordell Construction Cost Index found.
Annual construction costs grew to 3.2 per cent, reversing a brief slowdown and returning price pressures to levels last seen in late 2024 and 2025.
The latest jump far outstripped the softer growth recorded in the March and June quarters, which Cotality has dismissed as anomalies in the broader pricing cycle.
While conditions remain well below the extremes of the pandemic-era building boom, costs continue to rise faster than inflation, highlighting the ongoing pressure the industry faces amid a national housing supply shortage, Cotality Cordell costings estimation manager John Bennett said.
“At the beginning of the year, with the whole business in the Middle East…we felt like the building supply material industry was on hold and everybody was waiting to see what was happening and what was the next step forward.
“What has happened in these last two quarters is they’ve started to incorporate those into costs, transport and logistics.
“Those big, large, bulky products that require large truck transport seem to be the ones that are moving most. Plastic pipes, PVC, are all linked to the petrochem industry.”
It comes as construction of new homes is 95,000 short of what is required to meet Labor’s goal of delivering 1.2 million new dwellings over the five years to mid-2029, with developers demanding Treasurer Jim Chalmers reverse his budget investor tax changes to encourage more properties to be built.
Urban Development Institute of Australia (UDIA) president Oscar Stanley said construction costs, not demand, are driving new housing costs, and rising interest rates and government policy changes to negative gearing, capital gains, and investment by self-managed super funds are only worsening the building ecosystem.
“Targets are fabulous, but the harsh reality is 1.2 million homes is totally out of touch, and the projected gaps are only going to be further enhanced,” Mr Stanley said.
“When you see the whole supply chain struggling, from the sewerage contractors to the person putting the tiles on the roof, the system is broken
Kusher Consulting founder and economist Cameron Kusher expects building commencements to thin from the market’s current high level of construction as costs put further pressure on developer margins.
“The combination of rising construction costs and higher interest rates is probably going to leave us even further away from the (housing) target,” Mr Kusher said.
“It’s going to be pretty hard for developers to pass on those costs this time because we’ve just come off a period where we’ve seen very large increases take the sale price much higher. Equally, it’s going to be hard to justify putting up the price of a new property when the price of an established home is falling.
“It’s probably going to come more in margin pressure on developers and builders.”
Extracted in full from: https://www.theaustralian.com.au/nation/rising-building-material-costs-threaten-albanese-government-pledge-to-deliver-12-million-homes/news-story/b9156d13e829ee92a88d1471af075c8e
