What to expect with renovation and construction costs in 2026

Many people considering a renovation or new build are asking the same question: where are construction costs heading?

The short answer is that costs remain under pressure – and recent global events have added another layer of uncertainty.

Why costs are rising again

After stabilising somewhat in 2024 and 2025, construction costs are now being pushed higher once more.

A key driver is the sharp increase in fuel prices linked to the Middle East conflict. Fuel sits behind almost every stage of the construction process – from manufacturing materials to transporting them and running machinery on-site. As a result, builders and suppliers are facing rising costs across a wide range of inputs:

• Freight and logistics costs have increased – making it more expensive to move materials around the country.
• Key materials such as steel, concrete and plastics are becoming more expensive – in some cases rising significantly in recent weeks.
• Suppliers are introducing fuel-related surcharges – which are flowing through to builders and ultimately to consumers.

Ray White Group Chief Economist Nerida Conisbee noted that while Australia benefits from higher energy export prices, it also imports fuel, which means “households and construction face mounting pressure”.

In other words, the current environment is creating a renewed cost squeeze similar to what we saw during the pandemic.

What this means for you

For people planning a renovation or build, there are a few practical implications:

• Quotes may have shorter validity periods – as builders try to manage rapidly changing input costs.
• Budgets may need more contingency – to account for unexpected increases during the project.
• Timelines could be affected – particularly if supply chain disruptions continue.

At the same time, some projects may be delayed or reconsidered altogether, which could reduce demand and eventually help stabilise prices. However, that adjustment can take time.

What can be done about it

While global events are outside anyone’s control, there are steps that can be taken to manage the financial side of a project:

• Secure finance early – to understand borrowing capacity before committing.
• Structure lending carefully – especially for construction loans with progressive drawdowns.
• Build in buffers – both in terms of budget and borrowing capacity.

For some people, it may also be worth exploring whether to stage a renovation rather than complete everything at once.

A role for proactive planning

In uncertain conditions, planning becomes even more important. Having clarity around funding, timing and contingencies can make a significant difference to the outcome of a project.

Planning a renovation or build, or wanting clarity on your borrowing capacity or loan structure? If so, get in touch – we’re happy to help you work through the numbers.