Why construction costs rise and how to prepare

Whether you are planning a new home, extending your existing one, or finally tackling that long-awaited kitchen upgrade, the price tag today may look very different from what you expected even a few years ago.

At the QBCC, we know that the vast majority of licensed contractors aren't increasing their prices for the sake of it – they're navigating the same economic pressures that are affecting industries right across the world.

We want to help home owners understand why costs are rising, how they can protect themselves from unexpected construction costs, and how to work constructively with licensed contractors to achieve the best possible outcomes.

National data reflects these pressures. The latest ABS Producer Price Index  reports that demand rose over the past year, with construction industry prices increasing due to labour shortages, wage growth and higher input costs. This demonstrates that rising building prices are part of broader economic conditions rather than contractor‑driven increases.

Understanding the reasons behind rising building costs

Material costs have increased globally

Timber, steel, concrete and other essential building materials have all risen sharply in price over the past few years. Global supply chain disruptions, international demand spikes, and freight challenges have all contributed. Even as supply chains stabilise, many materials remain significantly more expensive than pre-2020 levels.

Contractors do not control these prices. They purchase materials at market rates, and those costs flow directly into project pricing.

Labour shortages are ongoing

Australia continues to face a shortage of skilled tradespeople. Demand for construction has surged following natural disasters, government stimulus programs and population growth, but the workforce has not expanded at the same pace.

When labour is scarce, wages rise. Contractors must pay competitive rates to secure qualified trades, and this is reflected in project costs. This is not about overcharging. It is about meeting the realities of the labour market.

Key recommendations in the Queensland Productivity Commission's Final Report into the building and construction industry aim to enhance labour mobility to address skills shortages in the construction sector through mutual recognition across states.

Insurance, fuel and operational costs have risen

Like every business, contractors face increased costs for insurance, fuel, equipment, and administration. These operational expenses form part of the overall cost of delivering a project safely and professionally.

How home owners can protect themselves from unexpected or increased costs

While rising prices may be unavoidable, home owners can take practical steps to stay in control of their budget and reduce the risk of surprise costs.

1. Start with a detailed contract

• A clear, comprehensive contract is your best protection. It should outline the scope of work, materials and specifications, timeframes, payment schedules, variation processes and warranties.
• Many cost blowouts occur because the contract was vague or incomplete. A detailed contract ensures everyone understands what is included and what is not.
• The QBCC website’s contracts page provides guidance, templates and checklists to help home owners understand what the most appropriate contract is for their project and what information it should contain.
• We recommend having your contract checked by a legal professional before signing.  

2. Communicate early and often

Good communication is one of the most effective ways to avoid disputes and misunderstandings. Discuss expectations upfront, ask questions, and maintain regular check-ins throughout the project.

Contractors appreciate proactive communication because it helps them plan, manage risks, and deliver a smoother experience.

3. Understand variations before they happen

Variations are one of the most common sources of cost increases. They occur when the home owner changes the scope of work or when unforeseen issues arise, such as structural problems discovered during demolition.

A strong contract will outline how variations are priced and approved. Never agree to a variation verbally. Always request it in writing – the scope and cost.

It is important to recognise that licensed contractors are (in most cases) not inflating prices without cause. They are operating in a challenging environment where materials, labour and operational costs have risen significantly. Many contractors have absorbed cost increases for as long as possible before adjusting their pricing.

Rising construction costs are a reality, but they do not have to derail your plans. With the right knowledge, home owners can navigate this environment confidently and constructively.

For practical tools, guides and checklists, home owners can visit the QBCC’s Home Owner Hub; for contract essentials, the contracts page provides clear guidance on what to look for before signing.

The QBCC also recommends hiring licensed contractors only, as licensed contractors are accountable to professional standards and regulatory requirements. They must meet financial, technical, and operational criteria to maintain their licence.