Cost of building a home in Australia jumps $100,000 in four years

The cost of building a home in NSW and Victoria has jumped by more than 25 per cent in four years, after completion times blew out during the pandemic.

The national average construction cost for a home – including houses, townhouses and apartments – rose from $345,410 to $443,828 between 2019-20 and 2023-24, according to Australian Bureau of Statistics data published last week.

The cost of building a home in Australia has increased by almost $100,000 in four years.Credit: Louie Douvis

Costs surged across all states during the period, rising by 25.5 per cent in Victoria and 30.2 per cent in NSW.

The biggest leap took place in Queensland, with a 44 per cent rise.

The cost of building a home soared during the pandemic due to higher demand, boosted by record low interest rates and government grants such as HomeBuilder. At the same time, disruptions to global supply chains pushed up material and freight costs, and worsened labour shortages.

Housing Industry Australia chief economist Tim Reardon said construction costs grew at the fastest rate in June 2022 as supply chain disruptions filtered through to the building process.

“You only need one disruption to disrupt everything else and the whole dynamic,” Reardon said. “If you’re missing one component, like the glue for a benchtop, you can’t manufacture that product, you can’t complete the kitchen, and you can’t sell the house.”

Reardon said timber prices have fallen about 20 per cent over the past year as global supply chains improve, but other costs – particularly for energy-intensive materials such as aluminium, glass and cement – continue to rise.

“The further we get away from the pandemic, the more settled those price changes will be,” he said.

AMP deputy chief economist Diana Mousina said construction costs were among the fastest rising components of inflation.

“It has moderated a lot over the past six to nine months, but it’s still growing faster compared to headline inflation,” she said.

“It started off as a supply issue, but the problem became worse because people were demanding materials to do renovations or to build their home.”

The influx has created a bottleneck: the number of houses under construction nearly doubled from 56,000 in June 2020 to 104,315 in March 2023, a number 48 per cent higher than the pre-pandemic record of 70,000 six years ago.

This figure dropped to 87,149 in June 2024, but building times remain long, increasing from six months and three weeks in September 2019 to nine months and four weeks in June 2024, the ABS reported.

Reardon said the ABS data was likely coming in with a lag. “Build times are now less than what they were pre-pandemic, though only by a week or two,” he said.

However, labour shortages would remain constant for at least the next two years, Reardon said, because of the large volume of government construction work under way that is taking up any excess capacity in the labour market.

Mousina said construction cost inflation, while down from its peak, could remain higher than overall inflation for some time, partly due to competing government infrastructure projects.

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