Construction Costs Surge While Home Values Fall, Choking New Supply

New dwelling costs rose 5.6% in the year to May 2026, accelerating from 4.7% the prior month. Simultaneously, established homes in Sydney and Melbourne—Australia's largest markets—fell 0.9% in June. The divergence tightens profit margins on new apartment projects already at the edge of feasibility, while supply constraints persist across the country. Developers face worsening economics precisely when housing shortages demand more construction.