Australia’s property market is continuing to cool, with Cotality reporting home values fell 0.7% nationally in July and 1.9% over the quarter.

But according to Ray White chief economist Nerida Conisbee, there’s one big reason we may not see a dramatic fall in prices- the cost of building is still incredibly high.

ABS data shows that the cost of building a new house is now 51% higher than what it was at the end of 2019. In Queensland, costs are up 61%, in South Australia 65%, in Tasmania 69%, and they’ve more than doubled in WA.

Why does this matter?

If established homes become much cheaper than the cost of building new ones, developments simply stop stacking up. That means fewer new homes, tighter supply and more demand pushed back towards existing properties.

So, while some areas could see larger price falls, construction costs may put a limit on how far prices fall nationally.

Once again, it comes back to the same issue – we need more homes, but they’re getting more expensive to build and, most importantly, taking too long.