Construction Costs Are Rising Again, But Victoria Is Faring Better Than Most

After a quiet start to the year, the cost of building a new home in Australia picked up pace again over winter, according to the latest Cordell Construction Cost Index from data and analytics firm Cotality. If you are partway through a build, weighing up a house and land package, or thinking about a knockdown rebuild, the figures are worth a look, because the story for Victorians is actually a little more encouraging than the national headline suggests.

What the figures show

National construction costs rose 1 percent in the three months to September, up from a much slower 0.2 percent rise at the start of the year. Over the full year to September, costs were up 3.2 percent, compared with 2.8 percent in the year to June. Every state moved at a different pace. Western Australia had the steepest rise, up 1.1 percent for the quarter and 3.6 percent for the year, with Cotality pointing partly to the extra cost of trucking materials across the country from the east coast. Queensland and New South Wales both rose 1 percent for the quarter. Victoria and South Australia shared the gentlest quarterly rise at 0.9 percent, and Victoria recorded the lowest annual rise of any state, at 2.8 percent.

Looked at over a longer stretch, the pace nationally has actually been easing rather than accelerating. The five year cumulative rise in building costs now sits at 26.1 percent, down from 29.5 percent reported the previous quarter, and every state remains below its own five year average rate of growth.

Why it matters for your build

If you are building rather than buying an established home, these numbers matter in a practical way. A fixed price contract locks in most of your costs upfront, but a long build, or a contract with cost escalation clauses, can still expose you to price movements between signing and completion. Cotality's John Bennett pointed to concrete, steel and plasterboard as the materials moving the most this quarter, with some of the increase linked to global costs flowing through supply chains from the conflict in the Middle East. None of that is something you or your builder can control, but it is something a good broker and a good builder can plan around together, by building a sensible contingency into your budget rather than treating the quote you signed as the final word.

It is also worth understanding how a lender looks at a construction loan. When a bank assesses whether you can service one, it typically tests your ability to repay at an interest rate three percentage points higher than the rate you would actually pay. That buffer, set by the banking regulator APRA, is designed to leave room for exactly this kind of cost and rate uncertainty. A modest rise in building costs on its own is unlikely to tip an approved loan into trouble, provided the contingency built into your budget was realistic from the start.

The bigger picture

Zoom out and the overall tone from Cotality is one of caution rather than alarm. Bennett described the slower start to 2026 as something of an anomaly, with the index now returning to a more normal pattern of quarterly increases, and said uncertainty is likely to continue as domestic and global conditions evolve. Every state remains below its five year average growth rate, which suggests the extreme cost blowouts of recent years have not returned, even if costs are clearly no longer falling. For Victorian buyers and builders specifically, having the lowest annual increase of any state is a small but genuine point in your favour, at a time when much of the other housing news has been about price falls and affordability pressure rather than relief.

Talk to us before you sign

If you are comparing a house and land package against an established home, or you already have a building contract sitting in front of you, it is worth talking to a broker before you commit. We can walk you through how a lender will view your build timeline and costs, what kind of contingency makes sense for your situation, and whether a fixed price or a more flexible contract structure suits your plans better. Building costs may be rising again, but with the right loan structure behind you, that does not have to mean rising stress.

Figures note: construction cost figures are from Cotality's Cordell Construction Cost Index for the September 2026 quarter, as reported by Cotality and The Urban Developer on 21 and 23 October 2026.

This article is general information only and does not take into account your personal objectives, financial situation or needs. Please speak with a Claremont Financial broker before making any borrowing decision.