Understanding Construction Costs – Trends, Challenges & Updated Data

1. What Is the Latest Update on Construction Costs?

Short Answer:

Construction costs have surged significantly over the past 12 months due to supply shortages and rising labour costs.

Key Trends Affecting Construction Costs:

📈 Material Costs Up – Timber, steel, concrete, and finishes have all increased.
📈 Labour Shortages – Skilled trades are in high demand, pushing up wages.
📈 Government Infrastructure Projects – Increased competition for resources.
📈 Supply Chain Disruptions – Ongoing delays and cost hikes for imported materials.

📌 Stay Updated on Construction Cost Trends: Speak to an Expert

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2. How Much Have Construction Costs Increased?

Short Answer:

Construction costs have increased by 30% or more in some regions, depending on asset type and location.

Current Construction Cost Estimates (Per SQM):

Property Type	Previous Cost (2023)	Updated Cost (2024-2025)	% Increase
Residential – Low Rise	$1,800 – $2,500/sqm	$2,400 – $3,300/sqm	+30%
Residential – High Rise	$3,000 – $4,500/sqm	$3,800 – $5,800/sqm	+25%
Commercial Office Fit-Out	$1,500 – $3,000/sqm	$2,200 – $3,800/sqm	+35%
Industrial Warehouse	$1,200 – $2,000/sqm	$1,700 – $2,800/sqm	+30%
Retail & Hospitality	$2,500 – $5,000/sqm	$3,200 – $6,500/sqm	+28%

📌 Get a Custom Cost Estimate for Your Project: Request a Consultation

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3. Why Are Construction Costs Increasing So Rapidly?

Short Answer:

A combination of labour shortages, material price hikes, and supply chain disruptions has led to a significant increase in construction costs.

Main Drivers of Cost Increases:

🚧 Labour Costs – Higher wages for skilled trades due to shortages.
🚧 Material Price Inflation – Steel, timber, and insulation have surged in price.
🚧 Supply Chain Bottlenecks – Global shipping delays affecting availability.
🚧 Increased Regulatory Costs – Stricter compliance and sustainability requirements.

📌 Need Advice on Managing Construction Cost Increases? Speak to Koste

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4. How Do Rising Construction Costs Affect Property Investors?

Short Answer:

Higher construction costs mean higher purchase prices, increased insurance valuations, and greater depreciation deductions for new builds.

Impact on Investors:

✔ Higher Property Prices – Investors need to budget for increased costs.
✔ Greater Depreciation Deductions – New buildings have higher tax claims.
✔ Increased Insurance Costs – Replacement values must be updated.
✔ Delays in Project Completion – Cost overruns and financing challenges.

📌 Ensure Your Property’s Depreciation Schedule Reflects True Costs: Request an Update

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5. How Can Developers & Business Owners Manage Rising Construction Costs?

Short Answer:

Developers and business owners can mitigate cost increases by using smart procurement strategies, accurate cost estimates, and tax-effective planning.

Strategies for Managing Costs:

✔ Plan Early & Lock in Fixed Contracts – Secure pricing before costs rise further.
✔ Source Locally Where Possible – Reduce dependence on overseas materials.
✔ Use Prefabrication & Modular Building Techniques – Lower labour costs.
✔ Optimise Tax Depreciation – Claim maximum deductions on capital costs.

📌 Speak to Koste About Construction Cost Planning: Request a Consultation

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6. Should Investors & Developers Be Concerned About Future Cost Increases?

Short Answer:

Yes. Construction costs are likely to remain elevated in the short term, with further increases expected due to labour shortages and supply chain constraints.

Future Outlook:

📈 Labour Costs Likely to Stay High – Skilled shortages persist.
📈 Material Costs Fluctuating – Some materials stabilising, but core costs remain high.
📈 Government Policy May Influence Costs – Grants, stimulus, and incentives could shift pricing.

📌 Get a Cost Forecast for Your Next Development: Request a Consultation

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7. How Can Investors Use Koste’s Construction Cost Table?

Short Answer:

Koste’s Construction Cost Table provides an estimate of current market costs, but given recent price surges, investors should use it only as a guide.

📌 Latest Construction Cost Table (Outdated But Still a Guide): View Here

How to Use the Table Effectively:

✔ Estimate Replacement Costs – Useful for insurance assessments.
✔ Assess Development Feasibility – Helps budget for new projects.
✔ Plan Tax Depreciation Reports – Higher build costs mean greater deductions.

📌 Need Accurate Cost Data for Your Project? Speak to Koste

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8. Will These Cost Increases Impact Tax Depreciation Reports?

Short Answer:

Yes! Higher construction costs mean larger depreciation claims, as depreciation is calculated based on actual build costs.

Impact on Depreciation Reports:

✔ Higher Capital Works (Division 43) Deductions – Structural costs have increased.
✔ Increased Asset Valuation (Division 40) Claims – Equipment & fit-outs now cost more.
✔ Insurance Valuations Need Updates – Ensure correct replacement costs are recorded.

📌 Ensure Your Depreciation Schedule Reflects True Costs: Request an Update