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# Why building a house keeps getting more expensive, even as demand weakens
- URL: https://www.benchmarkanalytics.com.au/why-building-a-house-keeps-getting-more-expensive-even-as-demand-weakens/
- Published: 2026-11-04T20:00:00.000Z
- Updated: 2026-11-04T20:00:00.000Z
- Description: House-building costs continue to rise despite softer demand. New ABS figures show how skilled labour shortages and competition from infrastructure and data centres affect housing supply.
- Author: Nick Hossack
- Tags: House Prices, Building Costs, ABS, Labour Market

Australia wants to build more homes. But the cost of building them continues to rise, despite higher interest rates and weakening demand for new housing.

New Australian Bureau of Statistics figures show **house-construction prices increased 5.7% over the year to September 2026**.

Queensland and Western Australia recorded increases of 7.8%, compared with 5.2% in New South Wales and 3.2% in Victoria.

Why are prices still increasing?

### The problem is not just housing demand

Construction requires skilled labour, materials, equipment and transport.

The ABS identifies continuing shortages of bricklayers, carpenters and concreters, alongside higher costs for copper, PVC products, freight and fuel.

Importantly, residential construction competes with other industries for these resources.

Government infrastructure projects, hospitals, schools, renewable-energy developments and private data centres all require construction workers and materials.

When several sectors expand investment simultaneously, they can bid up the prices of scarce inputs.

### What does this mean for housing supply?

Consider a housing project with an estimated construction cost of $500,000.

A 5.7% increase would add $28,500 if the project's entire construction cost rose at the same rate.

For developers, higher costs can make projects commercially unviable, particularly when financing costs are also elevated.

Some projects may consequently be delayed or cancelled.

This creates a difficult economic problem: Australia needs more housing, but rising construction costs can discourage the very investment required to increase supply.

### Is government investment contributing?

Potentially. Public infrastructure projects can compete with residential construction for the same labour and materials.

But infrastructure can also improve long-term productivity and increase economic capacity.

The policy question is therefore not whether infrastructure should proceed, but how investment should be sequenced and construction capacity expanded.

**Australia's housing shortage cannot be solved through planning approvals alone. It also requires improving construction productivity and the economy's capacity to build.**