Labour Costs: Skilled Workers in Demand

Australia faces a skilled labour shortage in construction. The industry struggles to hire tradespeople like carpenters, electricians, and plumbers.

• Wage increases are necessary to attract workers, which adds to the overall project cost.

• Overtime and delays further inflate expenses, especially when projects face shortages or disruptions.

In my 20+ years helping migrants secure mortgages, I’ve seen that even small delays cause costs to escalate significantly, reducing profit margins for builders and increasing home prices.

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Regulatory and Policy Changes: Rules That Drive Up Costs

Government policies can unintentionally raise expenses. These include:

• Building Codes: Stricter safety and environmental standards mean extra costs for compliance.

• Development Charges: Local councils often impose fees that builders pass on to buyers.

• Interest Rate Increases: The Reserve Bank of Australia (RBA) has raised interest rates several times recently. Higher borrowing costs increase the price of financing new projects, which adds to overall costs.

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Supply Chain Disruptions: Delays and Scarcity

The global pandemic showed us how interconnected supply chains are. Disruptions impact the availability and prices of essentials.

• Shipping delays increase lead times and costs.

• High demand for raw materials worldwide compounds shortages.

These factors mean builders face longer wait times, which lead to higher labour costs and inflation of material prices.

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Inflation and Economic Trends

Wider economic factors also contribute:

• Inflation: Rising prices for fuel, transport, and raw goods naturally push building costs upward.

• Currency Fluctuations: The Australian dollar's weaker value against major currencies makes imported materials more expensive.

“Inflation is a significant driver in the rising costs of construction,” notes the RBA’s recent reports.

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The Impact on Buyers and Investors

Rising building costs influence more than just developers. For potential homeowners and investors:

• Higher Purchase Prices: New homes cost more upfront, making affordability a challenge.

• Delayed Projects: Construction delays can slow down property markets and reduce availability.

• Increased Mortgage Amounts: Buyers need larger loans to cover the higher prices, which means more interest paid over time.

For example, a first-time buyer aiming for a $500,000 home may now face quotes of $650,000 or more, depending on the location and project scope.

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How International Buyers Are Affected

Many overseas investors and migrants want to buy or build in Australia. Rising costs impact their plans:

• Converting overseas savings often involves currency exchange risks. With higher property prices, the required deposit increases.

• Lenders may tighten eligibility criteria for non-residents due to regulatory changes and perceived risks.

• Understanding LMI: If your deposit is below 20%, you’ll need lender’s mortgage insurance—adding to costs. For international clients unfamiliar with Australian mortgage policies, navigating these fees is critical.

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Navigating the Rising Costs

To manage these challenges, consider:

• Early Planning: Secure quotes early and lock in contracts before prices escalate.

• Flexible Designs: Adjust plans to reduce costs, such as opting for simpler layouts or alternative materials.

• Financial Preparation: Ensure sufficient deposits and consider fixed-rate loans to lock in interest costs.

• Stay Informed: Follow updates from ASIC, the RBA, and FIRB to understand regulatory changes affecting construction and property investment.

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Final Thoughts: The Road Ahead

While building costs are currently high, they are influenced by complex, interconnected factors. Many of these are temporary or cyclical. As supply chains recover and demand stabilizes, costs may moderate.

However, for now, anyone planning to build or buy needs to be prepared for higher expenses. Working with experienced professionals who understand these dynamics can help mitigate surprises.

Navigating the Australian housing market in 2025 demands patience, adaptability, and good financial planning. Whether you’re a first-time buyer, investor, or migrant, understanding the reasons behind rising costs will help you make informed decisions and secure your property goals despite the challenges.