Annual growth of 2.8% stayed below year-ago levels despite a sharper quarterly rise
Homebuilding costs rose at a faster pace in the June quarter, driven by fuel and freight surcharges linked to the Middle East conflict, though annual growth remained below levels recorded a year earlier.
Construction costs increased 1% in the quarter, up from 0.2% in the March quarter, according to Cotality's latest Cordell Construction Cost Index. The annual growth rate of 2.8% stayed below the 2.9% posted in both the March and June quarters of 2025.
The figures come after widespread forecasts of significant cost increases following disruption to shipping through the Strait of Hormuz, after fighting between the United States and Iran broke out in late February.
"Despite considerable media attention surrounding construction inflation and forecasts of rising building material costs, these pressures are not yet being fully reflected in observed material pricing," said John Bennett (pictured right), costings estimation manager at Cotality.
"Instead, suppliers appear to be recovering costs through fuel levies, freight charges, logistics fees and other surcharges, rather than implementing widespread price hikes. Right now, it's a waiting game for suppliers, who are holding back on passing through the full force of cost increases until the global economy stabilises."
A renewed escalation in the Strait of Hormuz in recent weeks has pushed oil prices back above US$90 a barrel. Building materials are already 38.2% more expensive than in 2019, raising concern that further cost pressures may follow.
"Higher oil prices are driving up the cost of fuel and key products such as PVC, plastics and cabling," said Denita Wawn (pictured right), chief executive of Master Builders Australia.
"We urge the government to support local manufacturing by reducing input costs while maintaining access to high-quality, compliant building products and materials."
Master Builders Australia has also called on the government to resist tariffs on building materials imported from China, in a submission to a parliamentary inquiry into productivity. The Anti-Dumping Commission has launched several investigations into allegations that Chinese manufacturers are supplying cheap glass windows, doors and other building materials at prices that undercut domestic producers.
"Imported building products and materials play a key role in optimising competitive conditions in the market," the industry body said in its submission. "It is crucial that imports which meet the appropriate standards of quality continue to be available to building and construction companies without restrictions."
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