Why are construction costs skyrocketing?

Why are construction costs skyrocketing?

You get a quote.  It's way higher than you expected - again.  'Why?' you ask, and the answer is a version of a theme: 'Material costs have gone up!'

It's frustrating, especially when it feels like costs only ever move in one direction. But there are real, specific reasons behind the rise - and understanding them can help you make smarter decisions about what and when to buy. 

Here's a plain English breakdown of what's actually driving construction costs in Oz right now. 

The Big Picture

Before diving into individual materials, it's worth understanding the scale of what's happened. Building material costs in Australia have risen 53% over the past decade with COVID-19 acting as the catalyst and accelerant that the market still has not corrected.  Annual building construction prices rose 4.2% on aggregate over the past 12 months along.  Faster than broader inflation. 

But it feels worse. 

1. Timber: A Market That Never Fully Recovered

Timber is where most people feel the pain most acutely, and the story behind the price is more complicated than just 'COVID disrupted supply chains' - though that's certainly part of it. 

During the two years through 2022–23, timber prices spiked sharply as global supply chain disruption from COVID collided with record housing and renovation demand. Mills couldn't keep up. Imports were delayed. Prices soared.


The deeper problem is that Australia's domestic timber production was already struggling before any of that happened. Structural timber production peaked in the mid-2000s at over 2.3 million cubic metres per year, but by 2022 demand had surged past 2.5 million cubic metres — with imports making up nearly 30% of total supply just to keep pace. That import reliance turned out to be a serious vulnerability: when supply was disrupted, prices roughly doubled.


The trajectory isn't improving. By 2050, more than 40% of Australia's structural timber is projected to be imported, meaning the market will be increasingly exposed to whatever is happening on the other side of the world.


For plywood specifically, Australia's 12-month import volume crossed 500,000 cubic metres for the first time in early 2026 — a 21.8% increase year-on-year — with China now supplying nearly 44% of Australia's $3 billion wood products import bill. That concentration keeps headline prices in check for now, but it creates a single point of failure if anything disrupts Chinese supply.


Sources: IBISWorld; Timber Trader News; Altus Group Q1 2026 Construction Price Outlook

 

2. Steel: Trade Tariffs Are Landing Like a Sledgehammer

Steel has been squeezed from multiple directions simultaneously, and the most recent pressure is coming from trade policy rather than supply chains.

The Australian Government has imposed duties of up to 82% on Chinese hot-rolled coil steel, alongside increased duties on rebar imports and preliminary levies on steel from Malaysia, Thailand, Turkey, and Vietnam. The intent is to protect domestic manufacturing — but the short-term effect is upward pressure on prices across the board.

Beyond steel itself, higher copper and aluminium costs have also flowed through to metal products more broadly, including electrical components like cable and conduit. For a typical residential build, that adds cost across multiple scopes of work simultaneously.

Combined with ongoing freight disruptions from geopolitical instability (more on that below), steel costs are unlikely to ease in the near term.

Sources: Altus Group Q1 2026; ABS Producer Price Indexes, March 2026

3. Concrete and Cement: Energy Costs Have a Long Tail

Concrete is the material most people don't think about until the bill arrives — and right now, that bill is considerably higher than it used to be.

The reason is that concrete manufacturing is deeply sensitive to energy and freight costs. When either rises, concrete prices follow almost immediately. Major Australian suppliers Holcim and Heidelberg Materials have already applied fuel surcharges of $8.67 and $8.10 per cubic metre respectively. On top of that, operators are reporting imported cement costs up 15%, local grinding costs up 10%, and trucking adding a further 12–15%.

That's a lot of cost stacking on top of a product that goes into almost every residential and commercial build in the country.

The broader picture for concrete, cement and sand is a convergence of elevated input costs across raw materials, energy, labour, freight, maintenance, and environmental compliance — all moving in the same direction at once.

Sources: Altus Group Q1 2026; ABS Producer Price Indexes, March 2026

[IMAGE SUGGESTION: A concrete pour on a residential slab, or bags of cement at a building supplier — relatable for the residential audience]

 

4. Global Shipping and Geopolitical Risk

Australia imports a significant proportion of its building materials — and that means global freight costs feed directly into what builders pay locally.

Australia imports roughly 90% of its fuel, which means any global price shock is felt almost immediately across the supply chain. When shipping routes are disrupted or fuel prices spike, the cost of getting materials to Australia rises, and those costs get passed on.

Ongoing conflict in the Middle East has created exactly that scenario — pushing up oil prices and freight costs, with direct flow-on effects for diesel, bitumen, steel, and cement. Supply chain disruptions from the conflict have already led to emergency fuel levies on some construction inputs, directly increasing the landed cost of sand, concrete, and imported materials.

The broader point is that Australia's geographical isolation, combined with its heavy reliance on imported building products, means global instability hits the construction sector harder here than in countries with more domestic supply capacity.

Sources: RLB Oceania March 2026; Altus Group Q1 2026; ABS

New Building Codes Are Adding Costs Before a Nail is Driven

This one is less talked about, but increasingly significant. Tighter energy efficiency and sustainability requirements are adding cost at the design and specification stage — before a single material is ordered.

The Australian Government's push to enforce higher energy efficiency standards for new homes means builders must now specify better insulation, energy-efficient windows, improved sealing, and in many cases additional systems to meet compliance. These are genuinely beneficial long-term investments for homeowners — lower energy bills, better comfort, improved resilience — but the upfront cost is real and it lands on the construction budget.

For renovators extending or significantly altering an existing home, the compliance requirements can trigger upgrades to sections of the building that weren't originally in scope.

Is Labour a Factor as Well?

Absolutely — but it's a separate (and equally large) problem. Australia is facing a shortfall of 141,000 construction workers today, a number Infrastructure Australia projects will reach 300,000 by mid-2027. Labour shortages push up wages, slow project timelines, and reduce productivity — all of which add to the final cost.

That deserves its own article, which we'll cover separately. The short version: labour and materials are both expensive, and they're feeding off each other.

What Can YOU Do About It?

Knowing why costs are high doesn't shrink the final invoice - but it does help you make smarter decisions. 

Buy ahead if you can. Material costs aren't trending down in any meaningful way. If you know what you need for a project, or have flexibility in the planning of your project, locking in supply now rather than waiting generally works in your favour. 

Source locally where possible. Importing materials yourself or relying on long supply chains exposes your project to exactly the freight and geopolitical risks described above. A local supplier with stock on hand is worth paying a slight premium for.

Separate structural from decorative decisions. Not every sheet or piece in your build needs to be a premium-grade product. Use structural rated materials where the spec demands it, and make cost-conscious choices on everything else.

We stock a range of structural and decorative plywood, timber doors, and clearance building materials in Brisbane. If you're planning a build or renovation and want to talk through your options, get in touch with us here.

Sources

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