Construction cost escalation remains elevated across most markets, despite signs of softening momentum in construction activity, according to project advisory firm WT.
National cost escalation for building is forecast at 5.3 per cent for 2025, with infrastructure following closely at 5.1 per cent.
The report shows that cost pressures continue to challenge the industry – driven by entrenched labour shortages, volatile material costs, and subdued investment in sector capacity and capability.
“We’re seeing a complex mix of strong construction pipelines and persistent cost risks,” says Damon Roast, WT’s construction economist.
“While some regions show early signs of moderation, broader investment in skills and materials capacity is still lagging. Without it, elevated escalation could persist longer than expected.”
*Key regional highlights
- Sydney: Cost escalation forecast at 4.6 per cent (building) and 5.3 per cent (infrastructure). Infrastructure activity remains strong, but a softening Tier 2 contractor market and potential for revival in commercial and residential sectors could influence cost trends.
- Melbourne: Forecast to come in at 5.0 per cent for both building and infrastructure. Subcontractor market growing hungrier as infrastructure labour returns to building. A cyclical uplift is likely post-2026.
- Brisbane: Remains the national hotspot with escalation at 7.0 per cent (building) and 6.5 per cent (infrastructure). Strong health, education, and Olympic pipelines could continue to strain resources for several years to come.
- Adelaide: Escalation steady at 5.0 per cent (building) and 4.5 per cent (infrastructure). A strong pipeline persists, but shortages in skilled trades and housing for incoming workers are increasing upward cost risks.
- Perth: Escalation expected at 5.5 per cent (building) and 4.3 per cent (infrastructure). Construction activity fundamentals are improved; a good outcome with mining investment not booming. Skills shortages may stymy this uplift.
- Hobart: Major projects pipeline, boosting interstate labour needs, to drive elevated building escalation to 6.0 per cent. Infrastructure softer at 3.5 per cent with pipeline softer after recent strength.
- Canberra: Projected to see the lowest building escalation at 3.0 per cent, amid a soft pipeline, weakened labour demand and a financially constrained territory government. Infrastructure forecast at 5 per cent via elevated activity/pipeline.
- Darwin: Escalation forecast at 4.5 per cent (building) and 4.8 per cent (infrastructure). Cost pressures hinge on resourcing for potential defence and gas sector spending. Trades supply remains a constraint.
- Newcastle: Building escalation at 4.3 per cent. Major projects nearing completion are softening local pressures. Subcontractors reportedly hungrier for work.
- Geelong: Expected to ease to 4.8 per cent (building), with a two-speed market emerging. Connection with Melbourne’s eventual recovery will likely shape escalation trends to 2027.
- Gold Coast: Building escalation elevated at 7.0 per cent, driven by sustained housing demand and limited contractor appetite. Brisbane’s strong market is draining local skilled labour.
- Cairns: Building escalation forecast at 5.0 per cent. Near-term softness, partly via Cairns Hospital project delays, but activity (and escalation) supported by strong population growth, tourism demand and disaster rebuild efforts.
*All escalation figures quoted are for 2025.
Download the full Australian Construction Market Conditions Report – June 2025 at wtpartnership.com.au.