Are Construction Prices Coming Down?

If you’re in the property game — whether as a developer, investor, or builder — the question on everyone’s lips is: Are construction prices coming down?

After talking with builders and developers on the ground, the answer seems clear: no, not really. Prices have surged by around 30% in the last couple of years, and while they’re no longer climbing at the same breakneck speed, they’re also not dropping. Instead, we’re seeing a plateau. More or less, anyway — new data from CoreLogic’s Cordell Construction Cost Index shows a steady climb in residential construction costs, with quarterly growth hitting 1 per cent in both September and December of 2024.

Why have prices plateaued?

Several key factors are keeping construction costs stable at the moment. However, it’s worth noting that different states, state governments, and project types each have their own circumstances, influencers, and contexts.

1. Labour shortages & government projects.

One of the biggest reasons prices aren’t coming down is the ongoing shortage of skilled tradespeople. The Australian construction industry is still struggling to find enough workers, and that’s largely because government-funded “big build” projects continue to dominate the market.

Government infrastructure works — hospitals, rail networks, roads — are offering premium wages that private developers can’t compete with. If a concreter or electrician can earn more working on a state-funded megaproject, why would they take on private work for less? This means smaller builders are forced to pay a premium to secure trades, keeping costs high.

2. Material costs & supply chain disruptions.

While global supply chains have improved post-COVID, material costs haven’t dropped significantly. Steel, concrete, and other key construction materials are still in high demand, especially with large-scale projects continuing to soak up supply.

3. Demand vs. costs.

There has been a slight slowdown in new builds due to higher interest rates and overall cost pressures. This has prevented prices from rising further. But, there’s still enough work in the pipeline that builders don’t need to drop their rates to stay busy.

Could prices come down in the future?

It’s possible — but it depends on a few moving parts.

The biggest potential shift will come when major government projects begin winding down. With state and federal budgets under strain, there’s only so long the government can keep funding big infrastructure projects. When that work starts drying up, tradespeople and suppliers may be forced to return to private jobs, increasing competition and potentially easing costs.

However, predicting when this will happen is tricky. Elections, economic shifts, and policy changes will all play a role in determining how soon we see a significant shift.

The real question for investors: “Does it matter?”.

At Bowery, we believe that focusing on whether construction prices will dip is missing the bigger picture. What really matters is finding the right deals and structuring them well.

This is where due diligence and risk management become critical. Construction pricing is just one piece of the puzzle. More important is ensuring that a project is backed by a strong builder — one with financial stability, a reliable trade network, and a track record of delivering quality developments on time.

That’s why at Bowery, we go beyond just assessing project feasibility. Our due diligence process ensures that:

• Builders’ financials are reviewed — if a builder has poor cash flow, outstanding ATO debt, or is spread too thin across multiple projects… That’s a red flag.
• Tripartite agreements are in place — these agreements ensure that if a builder fails, we have the right to appoint another, preventing costly project delays.
• We look beyond the numbers — a project can look great on paper, but if the builder doesn’t have strong industry relationships or reliable trade partnerships, it can quickly fall apart.

Prices will always fluctuate.

We power on, regardless.

Yes, construction prices have stopped skyrocketing. But are they coming down? Probably not — at least not in the short term. And even if they do, smart investors should be focusing on deal quality, risk mitigation, and builder reliability, not just price fluctuations.

At Bowery Capital, that’s exactly what we do. We’re in the business of finding high-quality deals and structuring them to protect investors — regardless of whether prices rise, fall, or hold steady.

If you’re interested in learning more about how we approach due diligence, structuring, and risk management in the current market, let’s chat.