Australia construction costs rise 1.0% as momentum returns

National construction costs in Australia rose 1.0% in the September quarter, according to Cotality, picking up from the weaker pace seen earlier in 2026.

The latest Cordell Construction Cost Index showed the quarterly rise was stronger than the 0.2% increase recorded at the beginning of the year. Over the 12 months to September, construction costs rose 3.2%, up from 2.8% in the previous quarter.

The figures suggest the sector has moved away from the unusually soft conditions seen earlier in the year and back towards a steadier pattern of price growth. Even so, the current rate of increase remains below the levels common in the post-pandemic period.

John Bennett, Cordell Costings Estimation Manager at Cotality, said the latest quarter suggested momentum had returned.

"The subdued conditions at the beginning of 2026 were an anomaly, and expectations of sustained cost easing may have been short-lived. The return to quarterly growth of 1.0% brings cost escalation back into line with the levels recorded in late 2024 and 2025, highlighting the continued resilience of underlying construction cost pressures across the country," Bennett said.

State trends

Western Australia recorded the strongest quarterly increase among the states, with costs rising 1.1% in the September quarter. Victoria and South Australia posted the lowest growth at 0.9%, while New South Wales and Queensland each matched the national result of 1.0%.

Over a longer period, all states remain below their five-year average growth rates, according to Cotality. Bennett said Queensland and Victoria were performing slightly better relative to the national figures.

The state results suggest that while regional differences remain, construction cost growth has become more contained than during earlier periods of sharp escalation. That moderation is likely to be watched closely by builders and developers facing narrow margins and project budgeting pressures.

Materials pressure

Across trades and materials, price movements were mixed in the quarter. Plastics saw broad-based increases, while plasterboard recorded smaller uplifts.

Suppliers appeared to be moving back towards standard pricing cycles, although the market remained unsettled, Cotality said. Bennett also pointed to international pressures feeding into domestic pricing.

"Suppliers appear to be returning to standard pricing cycles, though ongoing adjustments continue across the sector. Additionally, some costs associated with the Middle East conflict may also now be flowing through to overall material prices. These developments are expected to place continued pressure on already tight builders' margins and overhead costs," Bennett said.

The reference to tighter margins reflects continued strain on builders even as the pace of cost growth remains below the peaks seen in recent years. Material cost changes, even when less severe than before, can still affect project feasibility, tender pricing and contract risk allocation.

Outlook unclear

Bennett said uncertainty still surrounded the sector's path over the rest of the year. Domestic conditions and global developments were likely to shape both the timing and scale of any further increases.

"There is continued uncertainty in the construction sector. While underlying cost pressures remain evident, the timing and magnitude of future increases will largely depend on how domestic and global market conditions evolve, making this a key area for ongoing review. In summary, the September quarter results confirm a renewed acceleration in construction cost growth, although the rate of escalation remains well below long-term historical averages," Bennett said.