Construction Costs Continue to Climb Across Australia
Construction costs in Australia continue to rise, driven by a range of hidden and compounding factors. Although industry optimism has improved since the COVID downturn, builders and investors are still navigating:
- Labour shortages
- A volatile global trade environment
- Lengthy approval processes
These challenges are collectively causing significant delays and cost pressures across residential and commercial building projects.
Labour and Skills Shortages Add to the Bottleneck
The shortage of skilled professionals—including quantity surveyors, site managers, and skilled tradespeople—is slowing project delivery. These gaps are preventing many construction projects from being completed within normal timeframes.
Government Charges Are a Major Cost Driver
A less-discussed but significant contributor to rising costs is the burden of government fees and taxes. These charges, while often overlooked, form a substantial portion of the total cost to build.
James Elliot, Managing Director of Red Dog Group, highlighted:
“You’ll find government fees and taxes account for roughly 46 per cent of the final price, which makes it harder for Australians to afford their own homes,” he told Australian Property Investor.
Example Breakdown (375sqm Block at $450,000):
- $45,000 in GST
- $43,000 in council and related fees
- $5,000 in planning charges
- $5,000 in water and sewage connection fees
- $19,000 in stamp duty (QLD) – Higher in VIC and NSW
Impact on New Home Buyers and the Wider Market
While new home buyers are the most visible group impacted by these taxes, Mr Elliot emphasised the broader market effect:
“There needs to be a serious conversation about these charges if Australia genuinely wants to address housing affordability.”
Developer Challenges
Developers also face considerable tax burdens:
- Stamp duty on large parcels of land
- Capital gains tax (CGT) on each subdivided block
- If land is sold within 12 months, CGT can reach 50% — equivalent to $225,000 on a $450,000 parcel
Competition from State Infrastructure Projects
Builders are increasingly competing for both labour and materials with large-scale State-run infrastructure projects. This trend is putting many private builders under financial pressure—some to the point of collapse.
When a builder goes under, it exacerbates the existing skills and labour shortages, leaving even fewer professionals available to complete ongoing and future residential or commercial developments.
