Rising Construction Costs: What First-Home Buyers Need to Know

First-home buyers in Australia are facing another hurdle: rising construction costs. After a brief slowdown, building expenses are set to surge again, affecting both budgets and timelines.

Why Are Construction Costs Rising?

  1. Materials: Locally sourced materials like concrete, bricks, and plasterboard have increased 6% to 6.5% annually. Global easing hasn’t reached Australia due to supply delays and inefficiencies.
  2. Labour Shortages: Australia lacks skilled tradespeople, driving up wages. Projects now take longer and cost more.
  3. Logistics: Remote areas face high freight and import costs. While fuel prices eased, overall logistics remain expensive.
  4. Regulations: Updated building codes (like 7-star energy efficiency) require costlier materials and designs.
  5. Industry Risk: Over 3,500 construction firms went under in 2024-25. Surviving builders now add risk margins, increasing prices.

Impact on First-Home Buyers

  • Higher Build Prices: Average home builds now cost $400k+ in many states.
  • Budget Risk: Unexpected price hikes and variation clauses can derail tight budgets.
  • Delays: Projects take longer, meaning more rent or loan interest payments.
  • Compromises: Buyers are scaling back plans—choosing smaller homes or cheaper finishes.
  • Limited Choice: Builder shortages and insolvencies limit buyer options and reduce negotiation power.

Summary Table

Cost Driver Reason for Increase Buyer Impact
Materials Local shortages and price spikes Higher base prices
Labour Skilled tradie shortage, wage growth Longer builds, higher labour costs
Logistics High delivery/import fees, especially regionally Increased build cost in smaller markets
Regulations More efficient/safe standards required Added upfront costs
Industry Risk Builder insolvencies, risk-loaded pricing Fixed price contracts harder to secure

 

Tips for Buyers

  • Get Multiple Quotes: Compare inclusions and timelines.
  • Negotiate Contracts: Look for fixed-price terms and check variation clauses.
  • Add a Buffer: Budget an extra 10–15% for unforeseen costs.
  • Consider Existing Homes: Avoid build delays and price hikes.
  • Trim Smartly: Reduce size or luxury finishes—not essentials like insulation.

Construction costs are rising, but informed buyers can still succeed. With careful planning, fixed contracts, and realistic expectations, first-home ownership remains achievable.

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