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Australian Construction Costs Poised to Rise

  • Adroit Insurance and Risk
  • May 5, 2026

Ongoing instability and supply issues related to Middle East conflict along with underlying inflationary pressures are causing building costs to increase beyond normal inflation measures.

Summarised below are some key points where costs are increasing. Your Risk Adviser can help arrange up to date valuations to ensure your policy limits remain adequate and are not subject to any possible underinsurance at the time of a loss. Remember that underinsurance doesn’t just apply to total loss damage events, so it’s critical to maintain correct sums insured.

If you have any questions or need assistance in obtaining valuations please contact your Risk Adviser.

Key Points: 

  1. Fuel Surcharges and Material Price Increases: 
  • Two major concrete suppliers (Heidelberg Materials and Holcim) will double their fuel surcharges from May 1, 2026. Boral already doubled its surcharge earlier in April. 
  • Fuel surcharges per cubic metre of pre-mixed concrete are rising sharply (e.g., Heidelberg from $8.10 to $17.75, Holcim from $8.67 to $15.97, Boral to $18.84). 
  • This will increase the cost of a concrete slab for a new home by about $400. 
  1. Inflation Impact on Construction: 
  • Inflation rates for new houses and renovations are expected to reach close to 6% by September 2026. 
  • Builders report absorbing cost increases of up to 8% since the Middle East conflict caused fuel prices to surge. 
  • Price increases are affecting not just concrete, but also timber, steel, and plastic pipes. 
  1. Plastic Pipes and Plumbing Supplies: 
  • The biggest price rises are for plastic pipes, with increases between 27% and 36%. 
  • Reece Group raised prices in April; Tradelink will increase prices on several brands by 28.5% to 36% from May 1. 
  • Raymor toilets and seats will rise by 20% to 35% from June 1. 
  1. Builders Absorbing Costs: 
  • Some builders are absorbing higher prices for ongoing projects to honor quoted prices, but new quotes will reflect increased material costs. 
  • Building supply prices have risen 7% to 8% since March 2026. 
  1. Extension and Renovation Costs: 
  • Home extensions start from $300,000 to $400,000; upper storey additions can exceed $600,000. 
  • Architect-designed extensions (150 sqm) have doubled in cost over five to six years, nearing $1 million. 
  1. Industry and Policy Implications: 
  • Barrenjoey’s building input costs index forecasts construction cost inflation to average 1.3% per quarter for the next three quarters, reaching 5.5% annual inflation by September. 
  • Civil contractors face additional pressures due to an emergency fuel cost order for the road transport industry, increasing costs for early earthworks and infrastructure. 
  1. Supply Chain and Labor Shortages: 
  • A backlog of demand for new builds and ongoing shortages of tradespeople are keeping prices high. 
  • Even if fuel prices drop, material prices are unlikely to fall due to persistent demand and supply chain constraints. 
  • Consider strategies for mitigating supply chain risks and labor shortages, such as securing contracts early or diversifying suppliers