🏗️ Construction Costs Edge Higher — What It Means for Home Buyers, Builders, and the Property Market

Australia's residential construction costs ticked up slightly again over the June 2025 quarter, according to the latest Cordell Construction Cost Index (CCCI) released by Cotality — a sign that while building inflation is slowing, it’s certainly not stopping.

At Best Foot Forward Mortgage Solutions, we closely monitor this data because it directly impacts property prices, valuations, insurance, lending assessments, and ultimately, your borrowing capacity.

Let’s break down what the numbers are telling us and what they could mean for your home-buying or building journey.

🔢 The Numbers: June Quarter 2025

• National construction costs rose 0.5% in the June quarter (up from 0.4% in March — the slowest rise since 2010).

• Annual growth to June 2025 is now 2.9%, up from 2.6% the year prior.

• Despite this uptick, current growth remains well below the pre-pandemic decade average of 1.0% per quarter.

According to Cotality’s Tim Lawless, Head of Research Asia/Pacific, while the latest rise is modest, it's a signal that building costs are reaccelerating, which could put continued pressure on inflation — and with it, interest rate decisions by the Reserve Bank of Australia (RBA).

🏠 Why It Matters for You

Whether you're building a new home, buying off the plan, or simply budgeting for renovations, these trends matter.

1. Home Building is Still Getting More Expensive
   Even at a slower pace, ongoing increases in labour and materials — especially insulation, flooring, and some structural items — are pushing the cost of construction higher.

2. Interest Rates Remain on Watch
   The RBA recently held the cash rate at 3.85%, but noted that home building costs were “slightly stronger than expected” and are a concern when tracking inflation. That cautious tone could influence rate settings in the months ahead.

3. Australia’s Housing Target May Be Slipping Out of Reach
   With the cost of delivering new housing continuing to rise, the government's stretch goal of 1.2 million new homes by July 2029 is increasingly under pressure. Builders are battling slim margins, high risk, and difficulty securing skilled trades.

4. Insurance Implications
   Building costs have jumped a massive 31% over the past 5 years. If you own a property, your insurance policy may no longer fully cover rebuild costs. It could be time for a review with your insurer.

📍 What’s Driving the Costs?

• Labour remains the biggest pressure point
  Skilled trades are in high demand due to a record level of public infrastructure spending — with labour shortages expected to persist through mid-2028, according to Infrastructure Australia.

• Materials like insulation and flooring saw 2% price increases this quarter
  On the flip side, heating and cooling products dropped slightly, down just over 3%.

📊 Construction Cost Growth by State (June Quarter 2025)

StateQuarterly IncreaseWA0.7% (Highest)VIC0.6%NSW & SA0.5% (National Avg)QLD0.4% (Lowest)

All states remain below the long-term average of 1.0% quarterly growth, showing some restraint — but also continued pressure for builders and homebuyers alike.

💬 Our Advice

Whether you're:

• Building your first home,

• Considering a construction loan,

• Looking to refinance after a build,

• Or trying to budget for a future renovation...

It’s critical to factor in rising construction costs, shifting rates, and possible changes to property values.

At Best Foot Forward Mortgage Solutions, we’ll help you:

• Understand how rising build costs impact your borrowing power

• Choose lenders with flexible construction loan options

• Avoid common traps around underinsurance or budget shortfalls

• Stay informed on RBA updates that affect your mortgage strategy

🧭 Ready to Build or Buy?

We’re here to guide you every step of the way — with smart, tailored advice that keeps you one step ahead of the market.

📲 Book a call
📥 Send through your plans or costings for a pre-assessment
💬 Ask us how to build your dream home without blowing the budget

Let’s put your Best Foot Forward.

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