What the latest construction forecasts mean for Australia

Housing bears the brunt

The residential market is facing several pressures at once. Higher interest rates are making projects more expensive to carry, while falling established dwelling prices are weighing on demand for new homes.

At the same time, builders continue to contend with shortages of skilled trades and rising material costs, leaving limited scope to reduce construction costs.

Master Builders Australia Chief Economist Shane Garrett describes the situation as a “perfect storm”, with productivity, workforce capacity and regulatory pressures adding to the challenge of increasing housing supply.

The result is a residential construction pipeline that is becoming increasingly difficult to expand at a time when demand for new housing remains a significant policy concern.

Other parts of the industry hold up

The picture is less subdued across non-residential construction. Master Builders forecasts $331 billion of non-residential building work over the five years to 2030–31, slightly above the $321 billion carried out over the previous five-year period.

Public-sector funded projects provide some insulation, while data centres have emerged as a notable area of activity.

Engineering construction is forecast at $688 billion, with resources and utilities expected to be the strongest performers. Transport and recreation-related construction, however, are expected to see significantly less work than in recent years.

The divergence highlights a construction market where activity is becoming increasingly uneven, with some sectors continuing to attract substantial investment while residential building faces mounting constraints.

What comes next

Master Builders attributes the downgrade to policy decisions in the May 2026 Federal Budget, continued interest rate increases and an unfavourable geopolitical environment, alongside limited progress in expanding the industry's supply capacity.

The organisation is calling for changes to regulation, investment settings, the National Construction Code, skilled migration and domestic training pathways.

For an industry already navigating higher costs and constrained capacity, the latest forecasts suggest the construction pipeline will remain closely tied to the policy and economic conditions shaping what can be built, where and at what cost.

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