Australia's housing correction has brokers fielding a new question from clients: If the market is falling, does that mean building is about to get cheaper? The early evidence says no. Cotality's Cordell Construction Cost Index (CCCI) for the first quarter of 2026 pointed to a stark rise in national construction costs, even as 12-month growth dipped to its lowest point in over 20 years. This split between slowing growth and still-rising quarterly pressure leaves little room for any cost relief for brokers' commercial property clients.
Tyrone Shandiman, managing director of Strata Insurance Solutions, said the correction does reopen the question the industry hasn't had to ask in years. "So the question is: if prices are falling, does that mean fewer people want to buy or build new properties?" he said. Fewer projects chasing the same trades and materials could, in theory, ease pressure on builders. "It could mean there's free capacity, and that the cost of construction comes down," Shandiman said.
The construction data so far doesn't back that theory up. Copper was already running hot before the Middle East conflict added fuel to the fire, with the Altus Group flagging it as Australia's "next construction shock" after a 16.5% year-on-year surge, driven by structural demand from electrification, AI data centres and renewables rather than the housing cycle. The same Middle East-related cost hikes are expected to show up more clearly in Australian Bureau of Statistics (ABS) and Cordell index data for the second quarter of 2026, with Brisbane forecast to see construction costs rise by more than 7% across the year as Olympics-linked infrastructure competes with the state's housing pipeline for the same labour and materials. Rawlinsons' own outlook points to the same tension nationally: sustained construction demand is being met by renewed cost pressures from labour shortages, productivity constraints and global geopolitical instability, even as activity is forecast to keep growing through 2026.
That gap between a cooling property market and a still-hardening cost base is exactly where insurance sits. Austin Rosier (pictured), principal risk adviser at Omnisure, said the two are not linked in the way clients assume. "Construction insurance sums insured and the correlating premiums paid, are based upon the cost of materials and labour - even where eventual sale prices may fall, insurance premiums have never been decided or evaluated upon this," he said. As Insurance Business has reported, insurers price rebuild cost, not market value, which means a falling market changes little about what a policy actually needs to cover.
The more pressing exposure, Rosier said, sits with projects that were budgeted against sale prices that no longer hold. If developers can't achieve the returns they planned for, the temptation to cut corners or rush completion rises and that is where trailing defects and liability claims tend to surface, sometimes years after a project settles. That risk lands at an awkward moment for the sector. NSW's Fair Trading and Building Legislation Amendment Bill 2026 is still before the upper house, aiming to widen decennial liability insurance cover by replacing the "serious defects" trigger with a broader "relevant defects" definition, while Victoria's own decennial insurance framework only recently cleared parliament. Both reforms assume a construction sector with the capacity and discipline to build to standard - an assumption that gets harder to guarantee if margin pressure pushes builders toward shortcuts.
Add a persistent national housing shortage into the mix and the incentive to keep building - regardless of where sale prices land - doesn't go away. That keeps demand for materials and trades elevated even through a price correction, reinforcing rather than easing the cost pressures brokers are seeing.
For brokers, a market correction happening alongside rising input costs and unresolved defect reform is likely a good time to revisit sums insured and construction covers more carefully, not less.
