Victoria again recorded the smallest rise in builder prices in the country in the September quarter. Over two years, the materials going into a Melbourne house have risen almost three times as fast as the price Victorian builders charge to build one.

How far have Victorian build prices fallen behind?

Over the two years to September 2026, the price Victorian builders receive for building a new house rose 2.1 per cent.

Over the same two years, the cost of materials going into a Melbourne house rose 5.8 per cent.

That gap of 3.7 percentage points is the widest in the country. In New South Wales, builder prices trailed Sydney material costs by less than one point. In every other state, builder prices rose faster than materials.

The figures come from the ABS Producer Price Indexes for the September quarter 2026, released on Friday. The output index tracks what builders receive for building a house, excluding GST. The input index tracks what builders pay for materials.

What did the September quarter show?

Victorian house construction prices rose 0.5 per cent in the quarter. That was the smallest rise of any state or territory for the second quarter running. Over the year, Victoria rose 3.2 per cent, also the lowest in the country.

Nationally, house construction prices rose 1.0 per cent in the quarter and 5.7 per cent over the year. That is a clear easing from the 2.0 per cent rise in the June quarter.

The ABS put the slowdown down to weaker demand. The cost pressure has not gone away. The bureau pointed to PVC piping, copper, transport and logistics, and continuing shortages of bricklayers, carpenters and concreters. Fuel surcharges linked to the Middle East conflict eased, but remained in place for most house builders.

At the other end of the table, Tasmanian builder prices rose 16.9 per cent over the two years to September. Western Australia rose 10.9 per cent and Queensland 10.0 per cent. Nationally, the figure was 6.2 per cent.

Is the Victorian gap still widening?

Not quickly. In the September quarter, Melbourne material costs rose 0.7 per cent, led by timber windows, up 2.9 per cent. Victorian builder prices rose 0.5 per cent.

Over the year, Melbourne materials rose 3.4 per cent against 3.2 per cent for Victorian builder prices. Close, but still the wrong way round.

Most of the gap opened earlier. The Victorian output index fell in both the December 2024 and March 2025 quarters while Melbourne materials kept edging up. Victorian builder prices did not climb back above their September 2024 level until the March quarter of 2026.

So the gap has stopped growing fast. It has not closed. And the input index covers materials only. Trade labour sits inside the builder price, and the ABS continues to report skilled labour shortages placing pressure on wages across construction.

A cheaper trade price in a flat market is usually covering a cost rise somewhere else, not adding to profit.

Where does a sharper subbie quote fit into that?

The ABS does not publish subcontractor rates by city. Trade labour is part of the builder output index but is not reported separately.

What the data does show is the setting any lower quote lands in.

When a builder’s selling price has barely moved and material costs have not stopped rising, a saving on a trade package is first absorbed by that gap. It closes some of the distance between what the job was priced at and what it now costs to deliver.

A quote that comes in under the allowance in an estimate improves that package. Whether it improves the job depends on what every other package has done since the estimate was written.

Over the two years to September, Melbourne materials rose 5.8 per cent while the price Victorian builders could charge rose 2.1 per cent. A trade package that now comes in a few per cent under its allowance may simply be pulling an older estimate back toward where it started.

A cheaper trade price in a flat market is usually covering a cost rise somewhere else, not adding to profit.

Input prices and output prices: what is the difference?

The ABS input price index for house construction measures what builders pay for building materials in each capital city. The output price index measures what builders receive for building a house, excluding GST, and includes materials, labour, overheads and margin. When input prices rise faster than output prices, builders are absorbing cost increases rather than passing them on.

What a lower quote is worth depends on where the job sits

On a job that has been priced but not yet signed, an updated trade price feeds straight into the estimate. It can change the price offered to the client, the margin held, or the contingency carried against cost movement.

Once a fixed price contract is signed, the client price is locked but unawarded trade packages are not. Any saving on those packages stays with the builder. So does any increase elsewhere.

Where a package has already been awarded, a general softening in the market does not change the agreed price. How that holds up depends on the subcontract agreement and its terms.

Two details decide whether a lower number is real. The first is scope. A cheaper quote only means something if the inclusions, exclusions, materials and program match the quote it replaces. A gap in scope can look like a saving until the variation arrives.

The second is timing. A quote carries a validity period and usually assumes a start date. If it expires before the trade is due on site, it does not hold the price for the builder when the work is actually done.

These are the same pressures behind the QBCC naming fixed price exposure as a viability risk. In a flat market the risk runs both ways.

The Good Builder Take

When subbies sharpen their pencils, it usually reflects the same thin pipeline that is keeping builder prices flat. That makes a cheaper quote good news and a warning at the same time.

In a market like Victoria’s, the useful question is not how much cheaper the trade came in. It is whether the job as a whole still matches the price it was sold for.

Will the rest of the country start to look like Victoria?

For two years Victoria has been the outlier. The September quarter hints that may be changing.

The ABS has now linked slower house price growth nationally to weaker demand, the same condition that has held Victorian prices down. Yet material costs nationally rose 1.0 per cent in the quarter and 3.9 per cent over the year, while building construction prices overall rose 4.9 per cent over the year. The national construction cost picture is still pointing up.

If demand keeps softening while costs keep climbing, builders in other states could face the same squeeze Victorian builders have carried since late 2024. That is our reading of the data, not an ABS forecast.

The next read is the December quarter release on 29 January 2027. The ABS has postponed its full reweight of the indexes and now plans to reweight the construction indexes in that release, which updates how much each product counts toward the total.

A correction, not a windfall

For Victorian builders, a sharper subbie quote is welcome. It is also a symptom of the same conditions holding their own prices down.

The ABS figures show two years of selling prices barely moving while material costs climbed almost three times as fast. Against that, a lower trade price is more likely to restore margin already lost than to add new margin.

The number that matters is not the saving on one package. It is whether the whole job, measured across every package at once, still comes in at the price it was sold for.

Frequently asked questions

Related articles

• Managing Subcontractors in Australia
• Construction Contracts in Australia
• QBCC Flags Fixed Price Contract Risk for Builders
• Australian Construction Industry Trends Guide

Last updated: 2 November 2026. Figures from ABS Producer Price Indexes, Australia, September 2026.

General information only. This article is general in nature and does not take into account your particular circumstances. It is not legal, financial or professional advice. Before acting on any information, consider obtaining advice from a suitably qualified professional.

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