REGIONAL OVERVIEW

Australia and New Zealand

Africa

Asia

Australia and New Zealand ↓

Europe

Middle East

North America

South America

UK

INVESTMENT

Brisbane booms amid healthy government investment – but productivity challenges remain

Brisbane has taken the top spot for costs across the Australia and New Zealand construction markets as government investment and population shifts drive growth. Yet despite more government attention on construction, supply-side constraints in many Australian cities and economic headwinds in New Zealand reveal a mixed picture for the region.

Brisbane has emerged as the most expensive city to build in across Australia and New Zealand, with the average cost of construction reaching US$3,135 per m². This marks a significant shift, as the city surpasses Sydney, a trend not seen in recent years. Brisbane now ranks 36th globally, seven places ahead of Sydney, which has previously been considered the region’s most expensive market to build.

Brisbane and wider Queensland have benefitted from strong public investment, robust interstate migration, and the positive effects of significant construction expenditure ahead of the upcoming 2032 Olympic Games. Investment is flowing into sectors needed to support the growing population, from healthcare and housing to energy and utilities.

While this growth is encouraging, Queensland’s construction market remains relatively smaller than those of Sydney and Melbourne. As such, the current scale of investment is likely to place significant pressure on the local supply chain, leading to capacity constraints. To meet this growing demand, leveraging interstate resources will be essential. Additionally, identifying opportunities to boost productivity and improve efficiency will be key to unlocking the full potential of the market in the years ahead.

Breakdown data

Data: Tendering conditions

Learn more

Data: Key challenges

Learn more

Data: Supply chain

Learn more

Data: Labour

Learn more

Data: Digital (BIM)

Learn more

Top performing sectors

Data centres

Renewables and clean energy

Health

Major public programs drive growth

The story in Brisbane mirrors a longer-term trend across Australia, where population growth and government spending on major programmes are increasing investment across sectors like health, education, housing, energy and utilities. Perth is another prime example of this. Fuelled by the state’s mining sector royalties and high migration inflows, strong public spending is generating a growing pipeline of projects across transportation, defence, health, housing, and energy. Perth is now the third most expensive market in the region after Sydney, at US$2,815 per m².

The return of two-speed market cycles is emerging across the region, with Brisbane and Perth now projected to see the strongest construction growth, in place of Sydney and Melbourne. The shift has been long anticipated, as the high cost of living and construction in the traditional growth hubs has gradually redirected focus toward emerging regional centres. The change has been the most significant in Melbourne, which is experiencing a meaningful slowdown in new investment from both the private and public sectors. This is attributed to the normalisation of public sector expenditure following several years of strong investment, while the private sector continues to be constrained by higher costs and taxes. Melbourne is now the second lowest for building costs across the region, rankings at US$2,655 per m², which is only marginally higher than Adelaide at US$2,587. Sydney remains higher on the regional cost ranking (second place at US$3,046 per m²), despite subdued construction activity, partly due to a historic and continuing premium for building in the city.

INSIGHT "The return of two-speed market cycles is emerging across the region, with Brisbane and Perth now projected to see the strongest construction growth, in place of Sydney and Melbourne."

By comparison, New Zealand is facing broader economic headwinds, where the impacts of monetary policy tightening to combat high inflation have had longer-lasting impacts on growth across the economy. Private sector construction investment has stalled, amidst uncertain domestic and global economic conditions, which has kept construction inflation stable at 3.0 percent in Auckland in 2025. The country’s high reliance on imports has increased its exposure to global supply chain disruptions and global trade uncertainties. Public spending remains constrained as key ministries review value for money across planned programmes, however, continued easing of interest rates suggest a return to growth could be around the corner.

Prioritising power to support digital investment

The region’s construction sector is seeing a continued shift away from major transport infrastructure programmes that have dominated the pipeline in recent years, towards energy projects such as wind, solar and pumped hydro storage. Our survey highlights the opportunity for many of the region’s markets, with renewable energy projects ranking second for the top-performing sector, behind data centres.

There is a strong interdependence between the two sectors: rising demand for data centres drives increased energy consumption, while expanded energy supply, in turn, enables further growth in data centre development. Data centre investment is heavily concentrated in Sydney and Melbourne, helping to offset some of the decline in other sectors. However, energy availability and expensive land costs are seeing investors explore locations outside of the existing hubs.

Managing capacity and boosting productivity

Pressure on specialist skills and overall capacity constraints across the region are the key drivers of rising construction costs. Most markets are projected to see elevated inflation rates persist through to 2026 for these reasons. Pay deals secured by construction unions in Sydney, Melbourne, Brisbane and Perth are expected to drive annual wage increases of around 5 percent for construction workers over the next three to four years. Labour shortages could see even higher annual wage increases for in-demand skills in some markets.

Productivity gains have the potential to ease future capacity constraints, but confidence in achieving these improvements is low, according to our survey. Despite government initiatives aimed at boosting construction productivity in Australia, current planning and building regulations and traditional procurement methods continue to limit innovation, particularly in areas such as modern methods of construction or digitalisation. Nonetheless, there is renewed ambition, with the Productivity Commission setting its sights on transforming the industry’s performance and unlocking long-term efficiency gains.

Across Australia and New Zealand, clients should be encouraged by strong public investment and continued interest in the construction sector, along with growing recognition of the challenges it faces.

In Australia, population growth and the ongoing housing crisis continues to drive demand for residential development, while public investment remains a key force behind activity in the education and healthcare sectors.

Federal and state governments are taking a more active role in workforce development, introducing new programmes, apprenticeships and training schemes tailored to the sector’s evolving skills demand– particularly in clean-energy production, transmission and storage, where growth is set to continue.

Encouragingly, there is growing coordination between the public and private sectors to identify long-term pipelines, giving the industry the visibility needed to invest in skills and training, where shortages are projected to be the greatest. This is embodied by the work of the Australian Constructors Association and the National Construction Industry Forum, which are working together on a new National Construction Strategy. The strategy aims to improve productivity, strengthen industrial relations, and foster better collaboration between clients and contractors with sharing risk and reducing insolvencies across the sector.

Organisations are encouraged to engage with these efforts and support the sector’s progression. In doing so, it will strengthen the industry’s resilience and ability to respond to wider geopolitical uncertainty and economic headwinds. With Australia and New Zealand maintaining deep economic ties to China, and the shifting global landscape, it is more important than ever for the construction sector to look outward to adopt global best practices.