The observation that the annual growth in construction costs has fallen to its lowest level in over a decade reflects the significant deceleration measured by the Cordell Construction Cost Index (CCCI) in Australia, even though underlying costs remain highly elevated.
The Deceleration of Annual Growth
The Cordell Construction Cost Index (CCCI), which monitors the rate of change in prices for labor, material, plant hire, and subcontract services within the Australian construction industry, recorded a national increase of 2.5% in construction costs over the 12 months to September 2025. This rate represents a marked easing from the 3.2% rise recorded over the 12 months to September 2024, and a decline from the recent peak of 3.4% annual increase recorded over the 12 months to December 2024.
According to Cotality Head of Research Eliza Owen, while overall construction costs remain high, the rate at which they are increasing each year has slowed significantly since the pandemic. Since the September 2023 quarter, annual growth in home building costs has remained at or below the pre-COVID decade average of 4.0%. Critically, the sources note that the national rate of annual increase has not been this low since March 2002.
Despite this slowing pace of growth, construction costs continue to climb from an already elevated base. The cumulative increase in costs since the pandemic has reached 30.8% or nearly 40%, placing sustained pressure on project feasibility and liquidity within the industry.
Quarterly Increases and Cost Drivers
While the annual rate has slowed dramatically, the September 2025 quarter still saw costs rise by 0.6% nationally. This quarterly growth was a slight uptick from the 0.5% and 0.4% increases seen in the previous two quarters. This underlying pressure is driven by several key factors:
• Materials: The September quarter experienced broad-based cost increases, primarily led by rising prices for metal and associated products. In contrast, structural timber remained relatively stable, and plasterboard and plaster products saw price declines, particularly in South Australia and Western Australia. Price updates prompted by the new financial year from many vendors also contributed to cost pressures.
• Labour: Labour costs rose during the quarter, reflecting the impact of annual enterprise wage agreements coming into effect. Competition for skilled trades remains a persistent challenge across the industry.
State Divergence
The national average masks varying trends across Australia:
• Western Australia (WA) bucked the trend, recording the highest quarterly increase at 1.3%, which was nearly double its rise in the previous quarter. This strong quarterly growth pushed WA’s annual construction cost increase up to 3.6% for the 12 months to September. This acceleration included a 5% annual uplift in ‘preliminaries’ (service costs associated with early construction stages, like approvals and insurance), possibly linked to the buoyancy of newly approved residential projects in the state.
• Queensland followed WA with a 0.7% quarterly increase, slightly above the national average.
• Other major states saw softer growth. Victoria posted a 0.5% quarterly rise, with its annual growth rate of 2.4% marking the lowest annual growth rate since the year to June 2007. New South Wales recorded the smallest quarterly growth at 0.4%.
Despite the challenges posed by high construction costs, rising prices in the established housing market may help support project viability. Nationally, dwelling approvals also saw a modest pickup of 4.3% in the three months to August, compared to the previous quarter.