The Cost Storm Has Arrived.

Major materials suppliers have confirmed price increases effective April 2026 — tender budgets set before this date may already be understated.

National Overview

A Market Under Pressure on Every Front

Australia’s construction sector was already navigating elevated costs before recent global conflict introduced a new wave of disruption. Geopolitical instability has triggered supply-side shocks across oil, fuel, shipping and insurance — all of which flow directly into your project costs.

What was previously a stable base escalation rate of 3–4% per annum is now subject to significant upside risk. The war has added an estimated 2% per annum to escalation — with each additional month of conflict adding a further 1%. For CRCPG clients managing active projects or planning new developments, this is not a future risk. It is happening now.

Labour shortages, weak productivity, and the extraordinary demand generated by AUKUS and the Brisbane 2032 Olympics compound the pressure. The Australian construction market is not broken — but it demands a more sophisticated, proactive approach to cost and risk management than ever before.

LABOUR PRESSURE  – FUEL SHOCK – SUPPLY CHAIN RISK – RATE UNCERTAINTY

Escalation scenarios

Three Outcomes — Which One Applies to Your Project?

CRCPG recommends all clients pressure-test current budgets across all three scenarios below. The difference between a low and high impact outcome could represent millions of dollars on a single project.

CRCPG client guidance

Five Actions to Protect Your Projects Right Now

Whether you have projects underway or in planning, the following steps can materially reduce your exposure to the current market volatility.

1. Review and stress-test your current budgets
   If your cost plan was set before April 2026, it should be revisited immediately against current market conditions, particularly for fuel, freight and materials-heavy scopes.
2. Adjust tender strategies to reflect uncertainty
   Either delay pricing until conditions stabilise, or clearly isolate escalation and risk allowances within tender documentation to avoid systematic underestimation.
3. Review contract provisions for cost adjustment
   Clarify entitlements early — particularly for fixed-price contracts. Builders are increasingly seeking to revise lump sum arrangements for uncommenced works.
4. Accelerate procurement planning
   Build in longer lead times, source from lower-risk markets where possible, and avoid reactive substitutions that drive cost blowouts under pressure.
5. Ensure insurance valuations reflect current replacement costs
   Replacement costs are rising faster than most valuation cycles account for. Underinsurance risk is real — and it is CRCPG’s view that many existing valuations are now materially understated.

Asset & property management

The Shift from Capital Growth to Capital Resilience

For commercial property owners and investors, the market is pivoting from expansion to management. As new development slows under feasibility pressure, the strategic priority is shifting toward maintaining asset performance, locking in compliant and energy-efficient outcomes, and preserving insurability.

Whole-of-life cost thinking is no longer a best-practice aspiration — it is a financial necessity. With CAPEX and OPEX increasingly linked, the decision to repair versus replace carries greater long-term consequence. CRCPG’s asset advisory team is actively supporting clients to model these trade-offs with greater precision.

For Build to Rent developments, the recent shift in Division 43 depreciation from 2.5% to 4% per annum is a meaningful change — improving after-tax cash flow and making long-term rental ownership more attractive where projects meet the criteria. Now is the time to ensure your tax and depreciation settings are working as hard as your assets.