If you’ve been thinking about building a new home, there’s some reassuring news. While construction costs have increased, they haven’t risen as sharply as many experts feared earlier this year.

Construction costs increased by 1% during the June quarter, according to the latest Cordell Construction Cost Index from Cotality. That is higher than the 0.2% increase recorded in the March quarter, but overall annual growth remains relatively modest at 2.8%.

Why Were Bigger Price Rises Expected?

Earlier this year, conflict in the Middle East disrupted shipping through the Strait of Hormuz, raising concerns that the cost of fuel and building materials would soar.

Some economists even warned that building a new home could become 10% more expensive, adding around $50,000 to the cost of construction.

Fortunately, those predictions have not yet become reality.

Why Haven’t Costs Increased More?

According to industry experts, suppliers have mostly avoided raising the prices of building materials directly.

Instead, many businesses are recovering higher operating costs through:

  • Fuel surcharges
  • Freight charges
  • Transport and logistics fees

This means buyers have not yet seen significant increases in the price of materials themselves.

Could Costs Still Rise?

There is still some uncertainty.

Renewed tensions in the Middle East have pushed oil prices higher again, which could eventually affect the cost of products like:

  • PVC pipes
  • Plastics
  • Electrical cabling
  • Transport and freight

Industry leaders say suppliers may introduce further price increases if global conditions remain unstable.

Building Costs Are Still Higher Than Before

Although recent increases have been relatively modest, building materials remain 38.2% more expensive than they were in 2019.

This reflects several years of rising costs following the pandemic, supply chain disruptions, labour shortages and ongoing inflation.

Calls for Government Support

Master Builders Australia is urging the Federal Government to help reduce the cost of construction by supporting local manufacturers while also keeping imported building materials available.

The industry says access to affordable, quality imported products helps maintain competition and keeps building costs under control.

What This Means for Home Buyers

For anyone planning to build, the latest figures are encouraging. Construction costs are still increasing, but at a much slower pace than many expected.

While future price rises remain possible due to global events, the feared surge in home building costs has not yet occurred, giving buyers and builders greater confidence as they plan their next project.