Two forces have just collided in the Australian property market — and most people haven’t noticed yet.
While the headlines have been dominated by geopolitical tensions and interest rate speculation, two structural shifts are quietly reshaping the outlook for housing in 2026 and beyond. Understanding them could make the difference between a well-timed decision and an expensive one.
Force One: Construction Costs Are Rising Again
What’s happening in global energy markets is no longer abstract. It’s showing up in invoices.
Building companies across Australia are already locking in price surcharges across core raw materials. Piping prices have increased by 36% — with an additional 10% regional delivery fee on top. Steel products used in residential construction have risen by up to 15% in a matter of weeks, with warnings of a further 10% increase. Freight costs for key construction inputs have jumped 20–30%.
This is inflation at the foundation level — and it flows through the entire system.
When oil prices spike, fuel costs rise. When fuel costs rise, transport rises. When transport rises, raw material prices follow. And eventually, the cost of building a home rises with it.
The counterargument — that buyers simply won’t pay more — sounds logical but misses how housing markets actually work. When supply is already constrained, a developer facing rising costs doesn’t absorb the loss. They either pass it on through the final price, or they shelve the project entirely.
Both outcomes point in the same direction: upward pressure on prices.
Australia’s Cordell Construction Cost Index already shows residential construction costs sitting 35.4% higher than in late 2019. New home completions are falling short of what’s needed to hit the government’s 1.2 million homes target. The supply problem existed before this latest cost shock arrived.
Force Two: Capital Gains Tax Reform Is Closer Than It Looks
In parallel, signals are strengthening that the Albanese government is moving toward reducing the capital gains tax discount on investment properties — potentially from 50% to 33%.
The political framing is straightforward: intergenerational fairness, helping first home buyers, rebalancing the tax system. And in isolation, the argument has surface-level appeal.
But housing is not purely a tax debate. It is, at its core, a supply problem.
Industry modelling tells a different story to the government’s pitch:
- Reducing the CGT discount alone could cut around 12,000 new homes per year — roughly 5–6% of annual new builds
- More aggressive modelling suggests up to 33,353 fewer homes built over five years
- Rents could rise an additional 1–2% above already elevated growth rates
Investors fund two in every five new homes built in Australia. In a market where private capital is doing the heavy lifting that government cannot afford, reducing the incentive to invest in new property does not help first home buyers — it removes the supply pipeline they depend on.
The investors most affected are not the large portfolio holders who can restructure their tax affairs. They are the everyday Australians — one or two properties, building toward a retirement — who are actively contributing to housing supply and reducing their long-term dependence on the public purse.
What This Means for Brisbane
Brisbane’s position is worth understanding clearly.
Vacancy rates are already at 1.1% and projected to fall further. Apartment prices have risen 28% and CBRE forecasts continued growth through to 2030. The Newstead and Teneriffe precinct — Brisbane’s most tightly held — remains undersupplied relative to demand, with quality stock commanding significant premiums over the broader market.
When construction costs rise nationally, the ripple effect on new apartment pricing is felt acutely in precincts like this one — where land is scarce, projects are complex, and supply is structurally limited by geography.
For buyers considering a purchase in 2026, these forces don’t suggest a market pause is coming. They suggest the window for making a well-considered acquisition — before costs feed further through the system — is narrowing.
The Bottom Line
Rising construction costs and potential CGT reform are not competing forces. They are compounding ones — arriving simultaneously in a market that was already under-supplied.
The consequences play out differently depending on where you sit:
- Buyers — acting on solid fundamentals sooner rather than later carries a stronger rationale than it did twelve months ago
- Investors — the case for owning quality property in undersupplied markets strengthens when both construction costs and tax reform reduce the future supply of comparable assets
- Renters — both forces point toward continued upward pressure on rents, particularly in inner-city precincts
At Cavalé, we believe the best decisions are made with a clear understanding of the market — not the headlines. If you’d like to discuss what this means for your property position, we’re always available for a direct conversation.
