Australia’s Construction Sector in 2025: A Mixed Start, But Signs of Optimism Ahead

Australia’s construction industry has started 2025 on a steady but cautious note. While overall activity remained flat in the first quarter, there’s a glimmer of optimism particularly for those in the residential sector. We’re keeping a close eye on the numbers, the policy signals, and what it all means for our clients, partners, and the projects we deliver.

A Balancing Act Across Sectors

The latest data reveals that total construction activity in Q1 2025 remained unchanged a result of growth in one area being counterbalanced by slowdowns in others. Here’s the breakdown:

• Residential construction grew by +1.6% for the quarter and +7.0% year-on-year. This continued strength reflects high demand for housing and a stabilising cost environment.

• Non-residential construction, including commercial and institutional builds, slipped by -0.1%, and is now -3.9% below last year’s levels.

• Engineering construction, long the powerhouse of the sector thanks to infrastructure investment, saw a -1.0% contraction, a signal that momentum in large-scale projects may be slowing.

We see these figures as a reminder of the importance of staying agile. With our experience across residential and commercial projects, we’re well-positioned to help clients navigate the shifting landscape. Cooling Costs, Rising Confidence

One of the standout trends for 2025 so far is the easing of cost pressures:

• The cost of building a new home for owner-occupiers increased by just +1.2% year-on-year, compared to the dizzying +20% peak in 2022.

• Rental inflation has cooled to +5.0%, its lowest rate since early 2023.

This reduction in cost volatility is good news for homeowners, investors, and builders alike. Combined with speculation around a possible interest rate cut by the Reserve Bank of Australia (RBA) in July, there’s real potential for renewed momentum in housing and select commercial developments. What This Means for Our Clients

For homeowners, developers, and commercial property stakeholders, the message is clear: now is the time to plan ahead.

• Residential construction is holding strong, with demand for quality homes and renovations still on the rise.

• Commercial builds may be facing short-term caution, but smart, future-focused developments - particularly those driven by tenant demand or government incentives remain viable.

• Cost pressures are easing, providing breathing room for more accurate quoting and long-term planning.

At MK Fuller, we continue to deliver premium building and renovation services across both residential and commercial sectors. We pride ourselves on transparent quoting, quality craftsmanship, and long-term value especially as the market recalibrates. Looking Forward

The remainder of 2025 will be a test of resilience and adaptability for the construction sector. If inflation continues to trend within the RBA’s target range and interest rates ease, we may see a welcome uplift across the board.

Whether you’re a homeowner considering a major renovation or a business planning your next commercial project, MK Fuller is here to guide you with insight, clarity, and commitment to quality.