Cotality’s latest Cordell Construction Cost Index (CCCI) recorded a 1.0% increase in construction costs nationally over the December 2025 quarter, the strongest quarterly growth of the year.
It marks a notable acceleration compared with the more modest quarterly increases of 0.4%, 0.5%, and 0.6% recorded earlier throughout 2025.
Despite this quarterly rise, annual growth over the 12 months to December was 2.5%, down from the 3.4% annual increase recorded at the end of 2024, and the smallest annual rise since March 2002.
Cotality Research Director Tim Lawless said while December’s figures reflect a return to the growth levels seen late last year, the annual figures remain well below historical benchmarks.
“There is clear evidence of renewed momentum across the December quarter."
"However, even with this uptick, annual growth in home building costs remains at its lowest point, sitting well below the pre-COVID decade average of 4.7%,” said Tim.
Western Australia (WA) and South Australia (SA) led the nation with the strongest quarterly increases, each rising by 1.2% in the December quarter.
For Western Australia, this represented a slight easing from the 1.3% rise in the September quarter, while South Australia saw a significant uplift, more than doubling from 0.5% in the previous quarter.
Across the broader trend, all states except WA and SA remain below their respective pre-COVID decade-long averages, highlighting the scarcity of construction inputs relative to demand across these two markets compared with the rest of the country.
Materials and wages drive uptick The December quarter saw several notable shifts in material pricing that contributed to the overall index rise.
“Structural timber products showed upward movement, marking a change from the previous quarter where prices had remained stable."
"In addition, other timber categories and cement sheeting products experienced price increases,” said Cotality construction cost estimation manager John Bennett.
John added that the material pressures were compounded by policy changes.
“The annual Fair Work minimum wage update came into effect during the quarter, adding further impact on labour and associated costs.”
While costs are rising, the sector is seeing a divergence in activity levels.
Dwelling approvals have trended higher through the year across most states, however Victoria and Tasmania are recording a softer trend, highlighting ongoing challenges in their residential construction markets.
Looking ahead to 2026, John expects persistent challenges for the industry.
"The year ahead is likely to be shaped by cost volatility, labour constraints, and supply chain adjustments."
"Price updates from vendors and the ongoing shortage of skilled trades will remain the primary hurdles for the sector."
"Careful monitoring of material pricing and workforce availability will be critical to navigating 2026,” concluded John.
