Building a home has exploded in costs

Peter Switzer
2 July 2025

Demand for housing is on the rise, and with four rate cuts expected by economists between July and February next year, there are two related problems for anyone wanting to get a new property.

First, the number of of houses being built (also known as supply) is way too slow and second, wait for it, the average cost of building a house is up 50% in the past year.

Yep, you read it right: 50%. In one year!

The Australian’s Jessica Wang has looked at figures from the Institute of Public Affairs and here are the hard facts:

  1. Construction costs have risen 50% in a year.
  2. In 2014, it took 8.5 months to build a home. Now it’s 12.7 months.
  3. Costs for building materials have risen 53% over the past decade.
  4. Covid negatively-affected the supply chain for materials.
  5. In 2024, while the Albanese Government promised 1.2 million homes built in five years, in one year they’re already 55,300 homes short.

When pulling out the performances state-by-state, Wang found the following:

“Using building activity data from the Australian Bureau of Statistics, the IPA found Western Australia was leading the construction lag with an unenviable increase of 85 per cent to 17.8 months. Building costs also have increased by 45 per cent. South Australia had the next slowest builds of 15.8 months, a rise of 74 per cent, with costs going up by 51 per cent.

“Across 10 years, the cost of materials had increased by 58 per cent in NSW and Queensland (where it takes 12.7 months and 10.2 months) respectively, to build a detached home. It takes 11.3 months to build a home in Victoria, and 12.6 months to complete a home in Tasmania, with material prices increasing by 56 per cent and 55 per cent.”

Quite correctly, the industry points the finger at government regulations not helping, a slowness to make land available and huge immigration levels. However, there are other negative factors contributing to this housing crisis.

IPA research director Morgan Begg gave more reasons for the cost and supply problems. “Over the past decade Australia has seen demand-driven cost increases to construction material and labour caused by large, inefficient government projects, creating the perfect storm of rising prices and rents, particularly in the post-pandemic period,” he said. “The latest figures reinforce the depth of Australia’s housing crisis, brought about by out-of-control migration intakes, a construction sector burdened by red tape and competition or resources from large, expensive and inefficient taxpayer-funded projects.”

A key message is that public sector infrastructure projects haven’t only taken tradies and builders away from the private sector, they’ve competed for materials and driven up what participants in the sector can ask for in terms of wages and prices for doing their work.

But there’s more to this high-cost story for anyone wanting a new home, which include:

  1. Inflation - which has been high since Covid and has only started falling over the past year;
  2. High interest rates and the aforementioned inflation have led to tradies and builders raising their prices;
  3. More luxurious and expensive asks from homebuyers and homebuilders compared to a decade ago, and
  4. A rising rate of mistakes in the building sector, which hurts productivity, further inflates costs and lowers overall quality.

Regrettably, we do in fact have a housing crisis, and a lot has to be done to fix it.

While Labor’s 1.2 million homes in five years was a good goal, there doesn’t seem to be a politician, federally, who’s doing much to kick it between the sticks, so to speak.

In NSW, Premier Chris Minns did try to convert Rosehill racecourse into 25,000 homes. However, the members of the Australian Turf Club nobbled that idea. And with potential new homeowners losing 12% of their pay to super, something serious has to be done to contain the rise in costs of building a home.

The Federal Minister for Housing Clare O’Neil has a huge task ahead to achieve her government’s goal of 1.2 million homes in five years at an affordable cost.

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