Construction costs rise in Q2 2025, but growth slows compared to previous years
According to the latest Cotality/CoreLogic Cordell Construction Cost Index, construction costs in Australia increased by 0.5% in the second quarter of 2025. This brings the annual growth rate to 2.9%, which, while significant, is a slower pace than the pre-pandemic average of 1% per quarter.
Global supply chain and geopolitical factors influence sentiment
Industry experts, including RLB Oceania research director Oliver Nichols, note that ongoing global supply chain disruptions and escalating geopolitical pressures are weighing on construction sector sentiment. These factors are contributing to uncertainty in material availability and pricing, making builders and developers more cautious in their outlook.
Cost pressures remain, but some relief compared to previous spikes
While construction costs continue to rise, the current rate of increase is more moderate than the sharp spikes seen in recent years. Analysts suggest that while the market is stabilising somewhat, persistent supply chain challenges and international tensions could still drive volatility in the months ahead.
Developers and builders adopt cautious approach amid uncertainty
With cost pressures and global uncertainties still present, many developers and builders are taking a more conservative approach to new projects. This caution is reflected in project timelines, procurement strategies, and risk management practices across the sector.
Industry remains vigilant as conditions evolve
Despite the slower growth in construction costs, the industry remains vigilant. Ongoing monitoring of global events, supply trends, and domestic demand will be essential for navigating the remainder of 2025 and beyond.
