Brisbane is becoming its own construction market – and the rest of Australia will feel it

South East Queensland is emerging as an escalation hotspot, with potential long-term implications for the national construction industry.

Altus Group’s adjusted Q4 outlook forecasts Brisbane construction cost escalation at 7.50 per cent in 2026, rising to 7.75 per cent in 2027.

In the other three capitals, things are cooling: Sydney and Melbourne are expected to track between 4.00 per cent and 4.50 per cent, while Perth sits modestly around 5.50 per cent. All three markets are expected to see a slight reduction in cost escalation in 2027. 

While this moderation offers temporary relief, the growing two-speed escalation dynamic may ultimately create higher costs for firms nationwide.

This divergence is not driven by a single factor. Instead, it reflects a convergence of pressures – labour shortages, material strain, policy shifts, and compressed delivery timelines – all happening simultaneously within the same region.

The effects will likely extend well beyond Brisbane and its surroundings, and construction firms that haven’t factored this into their planning by now are already running behind.

Two speeds, one national market

According to the Queensland Auditor General’s report, the state plans to deliver more than $116.8 in capital infrastructure projects over the next four years, driven by investments in transport infrastructure, public works, renewable energy, and preparations for the Brisbane 2032 Olympics.

Housing demand is also rising: the gap between commencements and completions continues to widen.

At current estimates, Brisbane will need to deliver 210,800 new homes or more by 2046 to keep pace with population growth. An estimated 122,600 construction workers will be required to meet this pipeline, with labour shortages projected to peak at over 50,000 workers between 2026 and 2027.

Events infrastructure, housing delivery, renewable energy projects, transport upgrades, and the state’s healthcare capacity expansion plan will all compete for the same skilled trades, in the same market, at the same time.

The workforce required to deliver Queensland’s building ambitions does not currently exist. To meet project deadlines, firms are likely to recruit labour from interstate markets such as Sydney and Melbourne, where pipelines are currently softening amid a cooling housing sector and fewer major project starts.

As materials and labour migrate north, developers and contractors in the southern states will encounter an eventual problem: resources could drain away just as their own pipelines begin to recover toward a new demand peak.

In Victoria, cost pressures may be easing as projects wind down from their 2025 peak, but several long-duration infrastructure projects remain scheduled to absorb and lock up labour and materials through the end of the decade.

New South Wales faces a similar outlook, with large renewable energy, metro, and road projects expected to commence in Q3 2026, signalling another wave of demand on the horizon. 

Pricing assumptions in both markets were made on the basis that present labour availability will hold.

Those assumptions are no longer reliable.

Construction firms that fail to factor this shift into their planning risk facing an all too familiar outcome: fixed-price commitments made against a cost base that later moves against them – the same dynamic that has resulted in record-high construction insolvencies to date.

How firms should adapt moving forward

It’s uncertain how long this uneven cost escalation dynamic will persist. What is less uncertain is that firms still working from national averages and last quarter’s data are already carrying more risk than their models reflect.

Getting ahead of that gap starts with a rethink of how costs are assessed from contract through to completion.

National cost averages used as proxies for project-level exposure will consistently understate the risk when it comes to cost viability through 2026 and beyond.

Real-time market intelligence – material prices, labour rates, and subcontractor availability tracked at a granular level – is what allows firms to price against the current escalation reality, rather than assumptions that are already several months out of date.

When local and national markets are moving at very different tempos, last quarter’s data is a shaky foundation for decision-making.

The same logic applies to quantity surveying.

Detailed project-specific cost assessments that account for a range of risk factors – like the compounding effects of concurrent projects competing for the same labour pool – are worth having early in feasibility conversations, not just at procurement.

Sourcing strategies that consider labour competition across overlapping work programmes, and subcontractor due diligence that goes beyond price to financial health, are the kinds of checks that will separate well-prepared firms from those caught out.

Brisbane’s boom may look like a regional story today. But when labour starts moving to where the demand is, while pricing assumptions remain anchored to conditions that are no longer certain, the cost will show up on balance sheets across the country.

The firms best placed for the next demand cycle won’t be those that reacted fastest – they’ll be the ones that saw this coming and priced accordingly.