- Average building costs have increased by over 51% since 2019, according to Ray White Group data
- The average time taken to build a house increased by 34% between 2019-20 and 2024-25, per the Institute of Public Affairs
- 35% of Australians are unable to absorb a construction project cost increase of 1% to 5%, per Equifax
Building a home was previously thought of as the simplest and most affordable way for young Aussies to get into their first home, which is becoming all the more prevalent with housing demand continuing to spike across the country.
However, with building timelines and costs skyrocketing, entering into a construction contract isn’t quite the sure thing it once was.
The perfect storm for soon-to-be homeowners and those in the market for a new build has well and truly hit, with an increasing number of people experiencing significant delays or budget blowouts.
Even with a fixed-price build contract in place, Australians are fighting an uphill battle to keep everything under budget and delivered as promised.
Delays causing dismay for Aussies stuck in home build hell
Across the 2024-25 financial year, the average time taken to build a house in Australia sat at 11.5 months for detached homes, 14.8 months for townhouses and 32.9 months for apartments, according to data analysis by Master Builders Australia.
While all of these figures represented decreases on the previous year, they’re still a long way off pre-COVID turnaround times; the Institute of Public Affairs (IPA) reported that the time taken to build a house increased by 34% between the 2019-20 and 2024-25 financial years.
WA residents were the worst hit, with average construction times ballooning by 71%, while those in SA (34%), Queensland (34%) and NSW (31%) also suffered.
On top of that, the iCIRT Construction Index: Capacity Report revealed that less than a quarter of active construction projects in the past year were delivered on time.
All of this paints a not-so-pretty picture for those entering the new build process, as buyers run the risk of financial stress by juggling gradually increasing mortgage payments with rent or other costs without a house to show for it.
Construction cost blowouts hurt Aussies, even with fixed contracts
One of the key reasons why build times are dragging out so much today, and why Aussies are becoming less trusting of building at all, is the increasing cost of construction.
Recent data from the Ray White Group showed that average building costs have increased by over 51% since 2019, making them far less affordable for those trying to break into the property market.
That hasn’t been helped by external pressures like the ongoing Middle East conflict, which sent the cost of crucial plumbing materials soaring by as much as 36%.
Of course, most lenders will require you to present a fixed price contract from your builder as a condition of home loan approval, so the overall cost won’t exceed that… will it?
The unfortunate reality is that when costs exceed the price your builder agrees to, which can come about due to overcommitting to projects in your city or delays setting in, it becomes unprofitable for them to complete.
Once that happens, construction companies can essentially hold buyers to ransom: either stump up more cash to get the build done or have it abandoned.
There have been far too many instances of builders running out of money midway through projects, leaving couples and families with incomplete houses and taking their money down with them.
Bathla Group is a recent high-profile example of such a company going under, while the 3,472 construction businesses that became insolvent in the last financial year accounted for almost a quarter (24.5%) of all company insolvencies over that period.
The hike in costs means that new builds, especially those established by smaller apartment developers, are going to drop significantly in availability over the next few months, according to Mirvac Head of Development Stuart Penklis.
“Supply is going to fall off a cliff in the next six months,” he stated this week.
“We’re going to see a significant reduction in commencements.
“Smaller developers that are more reliant on private credit – we’re going to see those developers pull back in the amount of new supply they bring into the market.
“If you look at the market, particularly in Sydney and Melbourne at the moment, supply is going to be very, very challenged moving things into the next six to 12 months.”
Against that backdrop, due diligence is essential when choosing a builder for your home or deciding on whether to sign up to an off-the-plan project; you can never be too careful when it’s your life savings at stake.
5% cost increase throws home construction into disarray for 35% of Aussies
The other side of the coin is the fact that these budget increases are so difficult to manage for a large number of people, with even a project cost increase of 1% to 5% enough to temporarily or indefinitely pull the pin on a home build for 35% of Aussies, according to Equifax.
For projects that exceed original estimates by 15% or more, only between 5% and 7% of Australian homebuilders or renovators are equipped to manage the revised cost.
Carefully planning out and budgeting for builds or renovations is crucial if you find yourself without much room to move with your savings.
That means mapping out all the fixtures and fittings required for the home, the cost of building your driveway and any landscaping required.
While this is important for those building their home, it’s even more crucial for builders, who can find themselves in a spot of bother due to inadequate construction timelines and loose costings.
“Young singles, couples and families looking to get into their first home via a new build need to take extra care to avoid overburdening themselves with debt,” Savvy Mortgage Broker Daniel Carter said.
“A detailed, itemised budget is one handy way to help you do that.
“Locking yourself into a contract at the absolute limit of your financial capacity also leaves you open to stress, so leaving a bit of extra space leaves you with options in the event of budget blowouts.
“You should also double check what's included in your contract, as missed items like driveways, landscaping or drainage could cost you tens of thousands.”
