Cost pressures will remain evident across much of Australia’s construction industry throughout 2025, a new report says.

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Quantity surveying firm Rawlinsons has released the 2025 editions of its Rawlinsons Australian Construction Handbook and its Rawlinsons Construction Cost Guide.

According to the Handbook, cost pressures are expected to remain significant across several capital city markets in 2025.

Across the eight capitals, Rawlinsons expects the rate of cost escalation that will occur throughout the year to range from 3.0 percent in Hobart up to 8.0 percent in Brisbane (see chart).

Cost pressures will be primarily driven by ongoing labour shortages along with growing levels of conservatism in bidding as contractors seek to ensure that margins are adequate to cover potential risks and delays on projects.

In terms of individual locations, the Handbook says that pressures will be particularly evident in Brisbane.

Across the calendar year, Rawlinsons expects overall cost escalation of 8.0 percent to occur across the Brisbane market. Most of this escalation is expected to occur during the second half of the year.

According to the Handbook, cost pressures in Brisbane are likely to remain notwithstanding that the rate of cost escalation eased during the second half of 2024.

In 2025, it says that robust levels of activity are expected across the city.

Contributing factors will include:

• Entry into the market of several infrastructure projects which are needed for the 2032 Olympic Games.
• Healthy levels of activity residential building. These will be driven by low unemployment, easing inflation, expected interest rate reductions, an underlying shortage of housing and increasing activity on build-to-rent projects.
• Reasonable levels of activity on development of commercial and industrial facilities.

In light of this, Rawlinsons says that there is likely to be little easing in price pressures notwithstanding that some competitiveness has returned in tendering.

Contract negotiations have remained drawn out and protracted as contractors continue to mitigate their exposure to delays and construction activity.

Whilst material price and availability pressures moderated across 2024, risks remain in terms of a shortage of trades across several occupations.

Elsewhere, pressures are evident in other locations.

In Sydney, the industry is experiencing a surge in activity on account of major infrastructure projects, expansion of the renewable energy sector and investment in data centres.

Notwithstanding a slight improvement in labour market conditions, the industry continues to face ongoing labour and material shortages. Shortages are especially evident in essential trades.

Beyond this, the industry will face further cost pressures.

For example:

• Increased requirements for building quality, safety and sustainability will add to initial costs notwithstanding their long-term benefits.
• The loss of skilled workers to Brisbane will become an increasing challenge as work associated with the Olympics gathers pace.
• Significant demand for copper is being driven by the need for the material in solar panels, wind turbines and battery storage as well as for electric wiring and connectivity in data centres.

Finally, in Perth, the Handbook indicates that upward price pressures remain on larger projects.

This is occurring as skilled labour remains an ongoing challenge and capable tier one contractors and subcontractors remain in short supply. This situation has been exacerbated over recent years by the liquidation of firms of various sizes.

This is the case notwithstanding that a level of competitiveness has returned to the market for smaller scale tenders.

To manage cost pressures, the Handbook recommends several strategies.

These include effective planning for logistics to manage long lead-times for mechanical and electrical equipment, innovative strategies to ensure timely delivery and ongoing maintenance of relationships with key subcontractors in order to remain the preferred contractor of choice with whom to work.

(image from Rawlinsons web site)

Launched in 1983, The Rawlinsons Australian Construction Handbook is now in its 43^rd edition and provides Australia’s largest library of construction cost data.

With more than 13,000 lines of data covering 32 trades, the Handbook is an essential tool for cost planning and provides accurate cost estimates for all project stages.

For smaller projects (up to $1.5 million), Rawlinsons Cost Guide serves as an essential reference book for builders, architects and consultants.

Both the Handbook and the Guide are available in traditional print or web-based digital format. Free delivery is offered anywhere within Australia.

Purchasers will receive quarterly price indices and updates throughout the year.

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