Housing construction costs are out of control


CBA published the following chart last week, showing that Australian residential construction costs have soared by between 30% and 40% since the beginning of the pandemic:

Residential construction costs

Independent economist Tarric Brooker posted the following chart on Twitter (X) showing the average construction cost of new homes across Australia:

Average cost of new home

Source: Tarric Brooker


The average construction cost across Australia was 395,000 in 2022-23 with the two largest capitals – Sydney and Melbourne – and the territories having the highest costs.

At the same time that construction costs have soared, land prices have also hyperinflated.

The following chart from Domain shows that the price per square metre has risen by between 33% (Melbourne) and Brisbane (58%) across the five major capitals:

House prices per square metre

Tarric Brooker notes that “new home costs can only rise so much before it starts denting demand in a much more serious and long-term way.”

The above facts are why the Albanese government has no hope of meeting its target of building 1.2 million homes over five years, or 60,000 homes per quarter.


Dwelling commencements are currently tracking at just 37,200, which is 38% below the government’s target:

Dwelling commencements

Financing costs are high, material costs have soared, and home builders are going bust at an alarming rate.


Moreover, home builders are now competing for workers with state government ‘big build’ infrastructure programs.

Thus, the only way to solve Australia’s housing shortage is to reduce net overseas migration to historical levels of less than 120,000 per year:


Net overseas migration must be lowered below the nation’s ability to build housing and infrastructure.

Otherwise, population demand will forever exceed supply.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.