New dwelling costs rose 5.7 per cent over the year to July 2026 even as headline inflation eased to 3.5 per cent, with rental inflation holding at 3.6 per cent, according to Australian Bureau of Statistics figures released on 26 August. The country’s peak building industry body says builders and tradies are wearing the squeeze first, and passing on what they can’t absorb.
The figures were published alongside a statement from Master Builders Australia, which argues rising costs and government policy decisions are both feeding the result. The ABS monthly consumer price index tracks new dwelling purchase costs as a separate component of the basket, measuring what buyers pay for newly built homes rather than the land under them.
Labour and materials are still landing on the invoice
Master Builders Australia Chief Economist Shane Garrett said building businesses continue to face pressure from rising costs and what he described as ill-considered policy decisions, which made the dwelling and rental numbers unsurprising.
“The ABS’s observation that higher labour and material costs are being passed on to consumers should serve as a reminder to government that when pressure is placed on builders and tradies, all Australians ultimately pay the price,” Mr Garrett said.
That’s the part worth sitting with. Headline inflation is coming off, but the line item that governs whether a residential job stacks up is still moving in the other direction.
The rent bill and a $3.42 billion claim
Garrett tied the rental result back to tax measures in the federal budget.
“The rental inflation result is also no surprise, particularly given independent modelling shows that following the federal budget’s tax changes the national rent bill could increase by $3.42 billion over the next four years, making it even harder for renters to save for a deposit,” he said.
The release doesn’t name the modeller behind that figure, and Master Builders is the industry’s peak lobby group. Treat the $3.42 billion as the association’s argued position rather than a settled number, and treat the ABS percentages as the hard data underneath it.
”More than 50 per cent higher than it was before the pandemic”
Master Builders Australia CEO Denita Wawn said recent policy decisions affecting investment are leaving many new projects no longer stacking up financially.
“The uncertainty created by global economic disruption and recent Federal Budget measures is hurting housing supply, pushing up rents, and undermining apprenticeships and productivity across the construction sector,” Ms Wawn said.
“The cost of building a home is now more than 50 per cent higher than it was before the pandemic, at a time when housing remains one of the biggest contributors to inflation and one of the top concerns for voters.”
Her warning on what happens next is the bit that hits order books rather than headlines: “A combination of rising costs for new dwellings, alongside market uncertainty, means that project decisions will be delayed and new housing supply will slow.”
Wawn also set out what the association wants before the mid-year budget update. “As we have consistently argued, the Government should reconsider its proposed changes to capital gains tax, negative gearing, and the ban on self-managed super fund investment in housing. At a minimum, it should grandfather the proposed tax changes to trusts including those used by small business builders,” she said, calling those steps a way of “restoring a pro-housing supply, infrastructure and construction agenda ahead of MYEFO”.
No government response appears in the Master Builders statement.
What it means when you’re pricing a job
Cost inflation on new dwellings doesn’t hit everyone on a site at the same moment. It hits whoever signed the price.
A detached house quoted this month gets built over the months that follow, and the escalation between signing and lock-up sits with whoever carries the risk under that contract. On fixed-price residential work, that’s the builder, and every subcontractor quote locked in behind it inherits a slice of the same problem. Chippies and concreters pricing off a schedule of rates written six months ago are the ones who find out late.
The supply side of Wawn’s warning matters more for the medium term than for this week. Projects that get deferred at the feasibility stage don’t show up as a quiet week on the tools now. They show up as a thin stretch a year or more out, because the frame carpenter doesn’t get the call until the slab is booked, and the slab doesn’t get booked until the numbers work.
That’s also the calculation sitting behind an apprentice decision. Taking on a first-year apprentice is a four-year commitment made against a forward order book, and Master Builders is explicitly arguing that current conditions are undermining apprenticeships across the sector.
What to watch
Two things. The next monthly CPI prints will show whether the new dwellings component keeps running ahead of the broader basket or starts converging with it, and MYEFO will show whether any of the tax measures Master Builders is targeting get changed, grandfathered, or left alone.
If you’re quoting residential work in the meantime, the gap between the headline rate you hear on the news and the 5.7 per cent moving through new dwelling costs is the gap you’re being asked to absorb.
Frequently asked questions
Why are new home building costs rising faster than overall inflation?
Master Builders Australia says higher labour and material costs are still being passed on to buyers, even though headline inflation eased to 3.5 per cent in the year to July 2026. New dwelling costs rose 5.7 per cent over the same period.
What is the $3.42 billion rent bill figure Master Builders cites?
It’s a projection from unnamed ‘independent modelling’ cited by Master Builders CEO Shane Garrett, who says the federal budget’s tax changes could add $3.42 billion to the national rent bill over four years. The ABS release doesn’t name the modeller, so treat it as the association’s argued position rather than confirmed data.
How does this affect construction apprenticeships?
Master Builders Australia CEO Denita Wawn says current policy uncertainty is undermining apprenticeships and productivity across the sector, since taking on a first-year apprentice is a four-year commitment made against a forward order book that may be shrinking.
Sourced from Master Builders Australia, Australian Bureau of Statistics. Original article.
