Think building and reno costs have jumped? The numbers confirm it

Renovating and building costs are on the rise again with labour costs one of the biggest contributors. Photo: Getty
If you’re planning to renovate or build your home in 2025 and have received an eye-watering quote for the job, you’re not alone.
Renovating and building costs are on the rise again, with CoreLogic research revealing that the price of residential construction jumped by 3.4 per cent in the year to December 2024.
That is the largest increase since the year to September 2023, when costs rose by 4 per cent.
What has gone up
This trend is making homeowners reach deeper into their pockets for building and home improvements, and is largely being driven by the increased cost of labour, according to CoreLogic construction cost estimation manager John Bennett.
The value of materials also played a part – while concrete blocks dropped in price by about 15 per cent, plumbing and pipework costs are rising, up 15 per cent in the 12 months to December.
Other increases included building preliminary fees, waste deposit fees, external fencing and landscaping products, electrical fittings, aluminium products and masonry bricks.
Costs, including for electrical fittings, specialised timber products, kitchen joinery, and steel reinforcing, are up 15 per cent in the past year.
Of course, some of these costs result from standard annual increases, particularly when considering inflation and the current economic climate.
CoreLogic economist Kaytlin Ezzy said the data represented another challenge for the construction industry, which was already struggling following the pandemic, when global supply chain shortages led to significant rises in overall building costs.

Residential construction companies continue to face profitability challenges as prices rise. Photo: Getty
How it affects the housing crisis
Despite the federal government’s Housing Support Program goal of delivering 1.2 million new homes over the five years from July 2024, Master Builders Australia chief executive Denita Wawn said building enough homes, commercial premises and infrastructure to meet increasing demand and a growing population was an “enormous task”.
Productivity in building and construction has declined 18 per cent in the past decade, while construction costs have increased by 40 per cent in the past five years. Build timeframes have blown out by more than 40 per cent.
“It’s clear this is not sustainable, and more needs to be done to tackle productivity challenges in our industry,” Wawn said.
“This includes fixing workforce shortages, reviewing the industrial relations system, improving planning approval processes, and removing unnecessary regulation.”
Builders under pressure
While building and renovation costs are still under the pre-Covid decade average of 4 per cent, Ezzy said the recent uptick in the annual pace of construction cost increases would be unwelcome news for builders already contending with tight profit margins.
“Residential construction companies continue to face profitability challenges,” she said.
She noted that CoreLogic’s Cordell Construction Cost Index had increased by 30.8 per cent since the onset of Covid.
“Outside of compressed margins and continued labour challenges, the construction industry is also facing a looming shrinkage in the construction pipeline,” she said.
Recent Australian Bureau of Statistics data for new dwelling commencements in the year to June 2024 found they were at 10-year lows, contributing to an increasing number of liquidations.
Ezzy said 2832 construction companies became insolvent in the 2023-24 financial year, representing the largest portion of company collapses.
“Although up over the year, dwelling approvals over the 12 months to November also remained 7.1 per cent below the decade average, suggesting this shortfall of new projects entering the construction pipeline may continue for some time,” she said.
What is the answer to rising costs
Wawn said labour shortages among tradespeople were the biggest source of pressure to deliver goals, along with approval processes and unnecessary regulations.
“This federal election, we are looking at all parties for practical and evidence-based solutions to labour shortages in the industry, which is crucial to addressing the housing crisis,” she said.
This story first appeared on View.com.au. Read the original here