Home Property Australia Construction cost growth up, but heading back ‘to trend’

Construction cost growth up, but heading back ‘to trend’

  • January 31, 2024
  • by Property Australia

CoreLogic indicates that the recent upswing in quarterly national construction costs is likely a return to the norm rather than a sudden surge.

The Cordell Construction Cost Index (CCCI), which monitors the expenses of constructing a typical new dwelling, showed a growth rate of 0.8 per cent in the three months ending December.

This marks a shift from the decreasing trend observed in the past four quarters, during which the quarterly CCCI reading dropped from 4.7 per cent in Q3 2022 to 0.5 per cent in Q3 2023.

The annual growth rate for the entire 2023 calendar year was 2.9 per cent. 

CoreLogic Economist Kaytlin Ezzy said although the quarterly CCCI reading has risen, the latest growth rate remains 20 basis points below the pre-COVID decade average of one per cent. 

“This suggests that reacceleration is more a return to trend rather than a new surge in construction costs,” Ms Ezzy said.

“While up over the quarter, the annual change in residential construction costs continued to ease as larger quarterly increases fell out of the annual calculation.”

With a 2.9 per cent increase over the past 12 months, the most recent annual growth in the national CCCI is the lowest since the year ending March 2007 (2.7 per cent).

This figure also falls below the average for the decade before the COVID-19 pandemic, which stood at four per cent.

“This suggests that growth in construction costs have normalised after recording a recent peak of 11.9 per cent over the 12 months to December 2022, albeit at a higher level. Although 26.6 per cent higher than at the onset of the pandemic, the recent surge in CCCI is below the increases seen across national house values, with CoreLogic’s Home Value Index rising 36.5 per cent over the same period,” Ms Ezzy added.

CoreLogic Construction Cost Estimation Manager John Bennett said pricing remains generally unsettled, with no clear trend seen across most product types.

“Depending on the supplier, both increases and decreases were recorded in timber and metal prices, although we have seen rises in the price of hardware and chemical items. This tells me suppliers are either bringing their product pricing back down to acceptable levels from the increases during the Covid period, or they are increasing to set up for the year ahead,” Mr Bennett said.

“In 2023 there was a bit of uncertainty around what the fallout from the interest rate increases would be and therefore the overall impact on the building industry. While the latest figures show the market has settled down, I don’t think we have seen the slowdown many were expecting.

“While dwelling approvals are still well below historic averages, there is still an elevated level of projects under construction which is keeping cost pressures high,” he added.

Price increases differed among states, with elevated growth rates observed in NSW, Victoria and WA. Conversely, SA and Queensland experienced a decline in quarterly CCCI growth. 


CCCI Change

CCCI Change


1.0% (+40
bps from previous

(Lowest since 12 months
to March 2021)


1.1% (up
0.3% in the September Quarter)

(Lowest since 2016)


(Down from 0.8% in Q3)



0.7% (+50
bps from Q3)

(Lowest annual rate among


(Down from 0.6% in Q3)


Ms Ezzy said the outlook for construction costs over the coming year is uncertain.

“While it’s unlikely we’ll see any declines in construction costs, the pace of growth could be influenced by several factors. Although national dwelling approvals have risen from a recent low of 12,185 in January, the latest data from the ABS showed that dwelling approvals remained -15.8 per cent below the decade average in November at around 14,500. Although a number of projects are still moving through the construction pipeline, the recent lull in approvals could result in a shortfall in new projects, which would help keep growth in building costs low, due to greater capacity in the construction sector.

“However, with the CPI continuing to ease, it’s looking increasingly like we’ll see a cash rate cut in the second half of 2024, which could fuel housing demand for both established and new dwellings. Regardless, the normalisation in CCCI growth will help provide some certainly for builders, insurance companies and homeowners alike,” she said.