Cost Of Building New Aussie Homes Over The Last 40 Years

The per m2 cost for houses and units since 1986

In the now classis 1999 film ‘The Matrix’ the antagonist, Agent Smith, tells one of the protagonists, Morpheus, that the simulation that he was experiencing was modelled on the peak of human civilization.

Ironically enough the Matrix was filmed in Sydney at that time and keen eyed viewers can even see parts of the Harbour Bridge in the background.

According to figures from property data provider PropTrack this time period coincided with the last gasp of broad based housing affordability, when a median earning household could afford the median home at a national level.

Source: PropTrack

This era also holds another major point of divergence, for the construction sector and home building costs across the nation.

Following the response to my previous article on the construction sector and more than a few Tweets on the issue, there was a drive from within the community to produce a metric with greater clarity than the average cost of building a new house.

After putting together the data from a number of different sources over the year to date, today I can do just that, the cost of building a home in Australia per square metre in real terms going back almost 40 years.

To that end today we will be looking at the:

• Cost of building a new house

• Cost of building a new unit

• Cost per square metre for a new house

• Cost per square metre for a new unit

• Comparing the per square metre cost of houses with units over time

Point Of Clarification

Before we get into the hard data it’s worth clarifying something. It is certainly true that the finish of homes has evolved over time and this influences the relative price.

However, the materials for that finish are now increasingly made overseas, so while there may be an increase in quality at an aggregate level, there are also some corresponding real decreases in relative costs compared with Australian made products used significantly more prevalently previous decades.

Castle Costs

Today’s journey begins way back in 1986. At this time the average cost of constructing a new house at a national level was $57,000 or $186,000 in 2023 dollars.

Shortly before our point of major divergence in 2001, that figure had risen to $139,000 or $257,000 in 2023 dollars.

In the year’s since, the growth in the cost of building a new home has been dramatic.

As of mid-2023, the cost of building a new house had risen to $472,800. This marks a fairly hefty premium over the $395,000 (2023 dollars) price tag in the final data point prior to the pandemic.

While home sizes have risen by 40% since our starting point in 1986, there has been a total inflation adjusted increase in total construction costs of 154.4%.

Per Unit Prices

In terms of unit’s, the average cost of a building new back in 1986 was $46,000 or $150,600 inflation adjusted to 2023 dollars.

Shortly before our point of major divergence in 1996, that figure had risen to $76,000 or $156,000 in 2023 dollars.

In the year’s since, the growth in the cost of building a new unit has been dramatic.

Between 1996 and 2006, the cost of building a new unit in real terms rose by 113.6%, to a figure of $333,408 (2023 dollars).

While new unit sizes did increase across this decade long period, the total rise in floor space 15.1%, far off the more than doubling in costs.

Over the next decade worth of data, price growth was relatively contained all things considered, up by 5.7%. However, this also came at a cost of the average floor space of a new unit declining by 7.6%.

It’s worth noting that the average floor space of a new unit peaked in 2010 and it has never recovered to its peak level.

The last major move in unit construction costs occurred between 2018 and 2023, with prices up by 32.4%. However, this was somewhat offset by the floor space of new units expanding by 9.9% across that same time.