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Ignite Accountants

Australian Construction in 2026

Writer: Tim Goode
Tim Goode
6 hours ago
9 min read

What builders, developers and investors need to know. The Australian construction sector in 2026 continues to operate in a market defined by persistent undersupply, cost pressures that haven't fully normalised, and a policy environment that pushes hard for delivery, yet actual completions still lag behind what's needed.


For builders, developers, and investors, this creates both opportunity and risk. The businesses and investors who will perform best through the remainder of 2026 and into 2027 are those with tight financial controls, realistic assumptions about feasibility, and the discipline to say no to work or deals that don't stack up.


This post breaks down the current state of play across the key indicators: approvals, activity, costs, finance, and sales and what each means for your business or investment decisions.


1. Building Approvals: The Pipeline Looks Healthier, But Conversion Is the Question

Building approvals remain the most-watched leading indicator for residential construction. They signal what could be built 6–18 months out, but in the current environment, the gap between "approved" and "commenced" remains wider than normal.


What the data tells us

Based on the latest ABS Building Approvals release:

  • Total dwelling approvals have shown signs of stabilisation after the volatility of 2023–2024, though they remain below the levels needed to meet the National Housing Accord target of 1.2 million homes over five years.

  • Private house approvals have been more resilient, supported by land releases in growth corridors and continued demand from owner-occupiers, particularly in Queensland and Western Australia.

  • Multi-unit approvals (apartments, townhouses) remain soft in many markets, reflecting ongoing feasibility challenges: higher construction costs, elevated financing rates, slower presales, and extended planning timelines.


What does this mean for you?

Builders: A firming approvals pipeline is positive for forward workload, but only if those approvals convert to contracts. Watch your enquiry-to-contract conversion rate closely. If it's declining, clients may be struggling with finance or facing sticker shock on build costs.


Developers: Multi-unit feasibility is still the constraint. If your numbers only work with optimistic assumptions (lower costs, faster presales, shorter programs), you're taking on more risk than the market is pricing in. Consider a smaller-scale or staged product where feasibility is more robust.


Investors: Approvals that don't convert to completions mean supply stays constrained. In markets where approvals are lagging demand (inner/middle ring, infill locations), this supports both rents and capital values provided demand drivers remain intact.

Source: ABS, Building Approvals, Australia (latest release)


2. Building Activity: Commencements and Completions Tell the Real Story

If approvals are "intent," then building activity data commencements and completions is the reality check.


What the data tells us

From the ABS Building Activity release (March quarter 2026):


  • Dwelling commencements have been tracking below approvals for an extended period. This reflects a combination of factors:

    • Builder caution (only starting what can be resourced and delivered profitably)

    • Client-side constraints (finance approvals, budget blow-outs, land settlement delays)

    • Labour and material availability in some trades and regions


  • Dwelling completions remain below the run-rate needed to address the national housing shortfall. While completions have lifted from pandemic-era lows, the pipeline of work in progress is taking longer to flow through, partly due to labour constraints, partly due to more complex builds, and partly due to defect/rework issues that are extending practical completion.


  • Work yet to be done (the value of contracted work not yet completed) remains elevated. This signals a large pipeline but also extended delivery timeframes and potential margin risk if costs continue to drift.


What this means for you

Builders: A large pipeline sounds good until you realise it's tied up in jobs that are taking longer and costing more, tying up working capital. Focus on:

  • Realistic program estimates at tender stage

  • Proactive cost-to-complete tracking on every job

  • Cash flow forecasting that reflects actual claim timing, not contract schedules


If your "work in progress" keeps growing but completions don't, you may be building a liquidity problem.


Developers: Completion delays are now the norm, not the exception. Your feasibility models should include:

  • Program contingency (10–20% on delivery timeframes)

  • Holding cost sensitivity (interest, rates, levies)

  • Settlement risk if buyers' circumstances change over extended build periods


Investors: Completions that remain below demand underpin the rental market and limit downside risk on established stock. If you're buying off-the-plan or investing in new builds, treat program delays as a base-case assumption and stress-test your holding costs accordingly.

Source: ABS, Building Activity, Australia (March 2026)


3. Construction Costs: Elevated, But the Rate of Increase Has Moderated

Construction cost inflation was the story of 2021–2023. In 2026, the picture is more nuanced: costs remain well above pre-pandemic levels, but the pace of increase has slowed.


What the data tells us

The Cordell Construction Cost Index (CCCI), published by Cotality (formerly CoreLogic), tracks the cost of constructing a "standard" dwelling over time.


Key trends from recent CCCI releases:

  • Quarterly growth has moderated from the double-digit peaks of 2022, but remains positive; costs are still rising, just more slowly.

  • Annual growth is now in low-to-mid single digits in most markets, compared to 10%+ during the peak inflation period.

  • The cumulative increase since 2019 remains substantial across markets; construction costs are 30–40% higher than pre-COVID levels.


Cost pressures vary by trade and region. Labour costs (particularly for finishing trades and supervisory staff) remain elevated due to skills shortages. Some materials have stabilised or eased, while others (particularly anything with energy or logistics intensity) remain volatile.


What this means for you

Builders: If your pricing hasn't kept pace with cumulative cost increases, your margins are under pressure even if inflation has "slowed." Key disciplines:

  • Re-estimate jobs at each stage (not just at tender)

  • Track margin drift weekly, not monthly

  • Avoid fixed-price contracts without appropriate rise-and-fall clauses or contingency

  • Walk away from work that doesn't price


The biggest risk isn't inflation; it's locking in work today at margins that won't survive tomorrow's costs.


Developers: Construction cost levels are now "the new normal." Feasibilities need to reflect:

  • Current cost reality (not 2021 rates)

  • Contingency for further escalation (5–10% minimum)

  • Realistic prelims and margin expectations from builders


If your feasibility only works with a "good builder at a sharp price," it probably doesn't work.


Investors: Elevated construction costs support replacement cost, the cost of building new. This creates a floor under established property values in many markets, particularly where land is constrained, and new supply is feasibility-challenged.


Source: Cotality, Cordell Construction Cost Index (CCCI) (latest release)


4. Housing Finance: Credit Conditions and Buyer Capacity

Demand for new housing is ultimately constrained by what buyers and investors can borrow and service. Housing finance data provides a read on purchasing capacity and forward demand.


What the data tells us

From HIA's analysis of housing finance and construction (August 2026):

  • Owner-occupier lending for construction has improved from the 2023–2024 lows, supported by easing (or stabilising) interest rate expectations and ongoing demand from upgraders and first-home buyers in growth markets.

  • Investor lending has lifted, reflecting improved rental yields and a recognition that supply constraints will persist. However, investor activity remains uneven across markets, strongest in Brisbane, Perth, and Adelaide; more cautious in Sydney and Melbourne, where affordability and yield compression are factors.

  • Loan-to-valuation ratios and serviceability buffers remain tighter than pre-2022 norms, constraining maximum borrowing capacity for many buyers, even those with high incomes.


What this means for you

Builders: Enquiry and sales activity don't always translate to signed contracts and deposits. Monitor:

  • Time from enquiry to contract (is it stretching?)

  • Finance approval rates (are clients getting knocked back?)

  • Deposit sizes and payment terms (are clients more stretched?)


Align your sales pipeline expectations with finance reality. Don't staff up or commit to suppliers based on "sales" that haven't converted.


Developers: Presales remain the gating factor for project finance. Credit conditions for your end buyers directly affect your ability to meet presales thresholds. Consider:

  • Product and price point alignment with borrower capacity

  • Targeting owner-occupiers vs investors (different lending dynamics)

  • Extended settlement terms and their risks


Investors: Credit conditions affect both your own borrowing capacity and the depth of the buyer pool when you exit. In a tighter credit environment, properties that appeal to a broader buyer base (price point, location, quality) tend to hold value better than niche or marginal stock.

Source: HIA, Housing finance and construction (August 2026)


5. New Home Sales: The Front End of the Pipeline

New home sales data, particularly for detached housing, are among the earliest indicators of where the market is heading 12–24 months out.


What the data tells us

From HIA's New Home Sales Report (latest release):

  • National new home sales have stabilised after the sharp pullback from the 2021 HomeBuilder-fuelled peak. Sales are now trending closer to long-run averages, though remain below levels consistent with meeting housing supply targets.

  • State-level variation is significant:

    • Queensland and Western Australia continue to outperform, driven by interstate migration, relative affordability, and demand in the resource sector.

    • Victoria and New South Wales remain softer, reflecting affordability constraints, higher land costs, and (in Victoria) additional tax and regulatory burdens.

    • South Australia has shown resilience, supported by affordability and population growth.

  • Cancellation rates and incentive activity are worth watching. Elevated cancellations signal client stress (finance, cost, or sentiment). Heavy discounting or incentive packages from volume builders can indicate softer demand or margin pressure.


What this means for you

Builders: New home sales are your forward workload. If sales are soft, the risk is:

  • Fixed overhead spread across fewer jobs

  • Pressure to discount or take marginal work

  • Cash flow stress as pipeline thins

If sales are strengthening, the risk shifts to:

  • Labour and subcontractor availability

  • Supply chain pressure on key materials

  • Locking in work at prices that don't hold

Either way, discipline matters more than volume.


Developers: House-and-land sales velocity in your target markets affects land value assumptions and project timing. In softer markets, consider:

  • Staged land acquisition (options, conditional contracts)

  • Smaller lot releases to test pricing

  • Product mix flexibility


Investors: New home sales data helps you understand where new supply is (and isn't) being absorbed. Markets with strong sales are adding to future stock, which may moderate rental growth. Markets with weak sales are likely to remain undersupplied, supporting rents and values, but with less new product available to purchase.


Source: HIA, New Home Sales Report (latest release)


6. Pulling It Together: What Should You Be Doing Right Now?

If you're a builder:

  1. Price for today's costs, not yesterday's. Ensure your estimating reflects current subcontractor rates, material costs, and realistic program durations. If you can't price a job profitably, don't win it.

  2. Track every job, every week. Cost-to-complete, margin position, variations, claims outstanding, cash in/out. Surprises kill businesses; visibility prevents surprises.

  3. Manage your pipeline, not just your sales. A big pipeline of unprofitable or slow-moving work is worse than a smaller pipeline of good work. Know your break-even workload and protect your margin floor.

  4. Cash flow is survival. Extended build times mean extended working capital cycles. Forecast conservatively, collect promptly, and maintain liquidity buffers.


If you're a developer:

  1. Stress-test feasibility. Run scenarios with 10% cost overruns, 6-month program delays, 1% higher funding costs, and 20% slower presales. If the deal still works, proceed. If it breaks, reconsider.

  2. Stage your risk. Lock in planning approvals, secure presales thresholds, and stage construction exposure. Don't commit capital ahead of de-risking milestones.

  3. Right-size your product. If large-scale multi-unit doesn't stack up, consider townhouse, terrace, or small-lot product where feasibility is more achievable, and buyer depth is stronger.

  4. Build relationships with capable, stable builders. The cheapest builder isn't the best builder. Prioritise track record, financial stability, and communication. A failed builder mid-project costs more than a fair margin paid to a good one.


If you're an investor:

  1. Focus on supply-constrained markets. Where approvals and completions persistently lag demand, rents and values remain supported. Avoid markets where new supply is about to flood in.

  2. Respect replacement cost. Elevated construction costs mean new supply is expensive to produce. Established stock in good locations often represents better value than off-the-plan with delivery and cost risk.

  3. Budget for delays and cost overruns on new builds. If you're buying off-the-plan or contracting a new build, assume it will take longer and cost more than quoted. Build that into your cash flow and financing.

  4. Maintain borrowing capacity headroom. In a tighter credit environment, having capacity to act (whether to buy, refinance, or weather a vacancy) is a competitive advantage.


The Bottom Line

The Australian construction sector in 2026 is navigating a complex environment:

  • Demand is real (population growth, housing targets, undersupply)

  • Delivery is constrained (costs, labour, feasibility, planning)

  • Risk is elevated (for builders, developers, and investors who overcommit or underprice)


But within this environment, well-run businesses and disciplined investors can perform strongly. The key is to operate with clear visibility over your numbers, realistic assumptions, and the discipline to make decisions based on what the data actually says, not what you hope it will say.


If you're a builder, developer, or investor looking to sharpen your financial controls, stress-test your feasibility, or simply get better visibility over your cash flow and margins, that's what we do.





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