Construction Costs in Australia Soften — Will It Be Enough to Revive Supply?
Construction costs in Australia are easing — but is it enough to revive supply and create new property investment opportunities?
In a market often defined by its volatility, construction costs in Australia are finally showing signs of stability. For anyone involved in real estate — from home buyers to developers and seasoned investors — this signals a possible turning point.
CoreLogic’s Cordell Construction Cost Index (CCCI) reported a national increase of just 0.4% in Q1 2025 — the lowest quarterly rise since 2010. This marks a notable slowdown from the previous two quarters, which saw 1.0% growth.
As any Property Investment Adviser would tell you, this easing could make a significant difference in feasibility calculations. After years of budget blowouts and labour shortages, developers and investors now have room to breathe.
According to CoreLogic’s research director, Tim Lawless, the cost to build is still increasing, but at a slower pace. Since the start of COVID-19, construction costs have jumped by more than 31%. This has created feasibility challenges — but also opened doors for strategic investment.
Input prices for house construction declined by 0.1% in the March 2025 quarter, marking the first quarterly drop in building material costs since March 2012. This fall was mainly driven by discounts on key materials like timber and steel, as builders responded to softer market conditions—particularly in New South Wales and Victoria, where residential construction demand remains low.
Most material prices remained steady, reflecting easing cost pressures and subdued demand.
Over the year, input prices to house construction still recorded a modest increase of 1.1%.
What Softer Construction Costs Mean for Property Investors
For property investors working with a trusted Property Investment Consultant, or independently managing their portfolio, the recent softening in construction costs in Australia may signal a shift in strategy. Here’s how this change could reshape your investment approach:
More Feasible New Builds
With cost growth slowing, more new build projects are becoming financially viable — particularly in growth corridors and emerging regional markets. This presents a golden window for investors looking to add positive cashflow property to their portfolio or explore custom builds through Property Investment Services. Projects that were once borderline due to high construction costs may now offer strong yield potential.
Clearer Build Timelines and Budgeting
For both investors and Property Investment Advisers, predictability is key. Slower price increases reduce the risk of unexpected budget blowouts and construction delays — making it easier to plan and execute investment strategies.
Property Investment Advisers and Buyers Agents in Brisbane, Gold Coast, and other active markets can now give investors more accurate cost expectations when recommending House & Land packages or development options.
New Opportunities in Growth Suburbs
As cost pressures ease, development in high-growth corridors like Logan (QLD), Greater Perth, and Adelaide’s outer suburbs becomes more attractive. For a Buyers Agent in Perth or Buyers Agent in Sydney, this opens up new possibilities to guide investors into affordable areas poised for value growth — while still tapping into strong rental demand.
Potential Boost to Rental Supply — and Investor Yields
Easing construction costs may lead to more projects breaking ground, gradually easing rental supply constraints. For investors entering early, this means locking in high rental yields before vacancy rates start to normalise. A Property Investment Specialist would view this as a smart timing advantage, especially in markets with growing populations and tight rental stock.
Home Prices Keep Climbing, What Does It Mean for Property Investors?
The market continues to show mixed signals — while construction costs have softened, property values kept rising in April.
Despite ongoing uncertainty from tariffs and the recent federal election, property values continued to climb in April. CoreLogic’s National Home Value Index recorded its third consecutive month of growth, with dwelling values rising by 0.3% to reach a new record high. This increase has added approximately $2,720 to the median value of an Australian home over the month — suggesting renewed buyer confidence.
Meanwhile, Latest figures from the Australian Bureau of Statistics revealed that after a relatively stable performance in February, Australia’s building approval figures for March 2025 reveal a notable slowdown, particularly in the residential construction sector.
In March, approvals to build new homes dropped by 4.5%, with 8,804 new homes getting the green light. This was a step back after a small rise in February. The total money being spent on building homes also fell by 7.6% in March, down to $8.98 billion, after going up the month before.
The combination of rising home values and declining building approvals points to tightening housing supply, which may place further upward pressure on prices in the coming months.
Stay updated on Housing Market 2025. At High Income Property, we can help you understand the changes in Australia’s Housing Market and focus on strategic investment decisions that are essential for achieving your financial objectives in property investment. To discuss your options, schedule an online meeting or call (02) 8007 4001.