The Australian construction industry enters 2025 with cautious optimism, as it begins to recover from the challenges of 2024, including rising costs, labour shortages and widespread insolvencies. 

As Australia’s construction industry enters 2025, it navigates a complex terrain shaped by persistent economic pressures, labour shortages and a surge in subcontractor insolvencies, challenges that defined much of 2024. 

However, optimism remains buoyed by a strong pipeline of projects across key sectors, the adoption of cutting-edge technologies and increasing advocacy for government intervention to bolster resilience and foster innovation. The sector’s focus on digital transformation and sustainability are now viewed as critical drivers for maintaining momentum in a challenging economic climate. 

What does the future hold for Australia’s construction industry? By analysing pipeline data and incorporating exclusive insights from industry leaders in BCI’s newly released Construction Outlook Report – Australia, we can better understand the current impacts on market resilience and forecast trends for the upcoming year. 

The Construction Outlook provides valuable insights into the performance of key building sectors and project regions since late 2022 as well as exclusive insights from sector leaders who are navigating emerging challenges and pioneering solutions for growth.  

Respondents included:  

• ADCO Constructions, Managing Director, Neil Harding 

• AHURI, Managing Director, Dr Michael Fotheringham 

• Aqualand Prestige, Executive General Manager, Wayne Xiong 

• Consolidated Properties Group, Head of Residential, James MacGinley 

• Cox Architecture, Director, Eliza Suffren 

• Crema Constructions, General Manager, Adam Keenan-Dunn 

• DKO Architecture, Principal, Koos de Keijzer 

• FK, Partner and Head of Design, Nicky Drobis 

• Global GreenTag, CEO, Technical Director and Co-founder, David Baggs 

• Gray Puksand, National Managing Partner, Nik Tabain 

• HIP V. HYPE, Founder and Managing Director, Liam Wallis 

• Kapitol Group, Director, David Caputo 

• Resimax Group, Development Director, Callan Ainsaar 

• Samuel Property Group, Managing Director, Illan Samuel 

• Slattery Australia, Director of Partnerships and Innovation, Sarah Slattery 

• Texco Construction, Director, Tom Bull 

• Third.i Group, Head of Acquisitions, Florian Caillon 

• Urbis, Director, Kate Meyrick 

5 Key Risks Shaping the Australian Construction Sector  

Here are five key risks influencing the Australian construction industry extracted from the latest edition of the Construction Outlook – Australia.  

1. Project deferrals and abandonments remain high 

2. No relief from construction cost escalations 

3. The rising cost of climate inaction 

4. The housing crisis reshaping Australia 

5. Tech arms race threatens late adopters 

Project deferrals and abandonments remain high 

Australia’s residential sector is grappling with elevated rates of project deferrals and abandonments, though still below historical peaks. Surging inflation, labour shortages, and escalating construction costs are key drivers of this trend. In Q3 2024, residential project abandonment in Victoria surged to 8.6%, the highest in the country, while commercial project abandonments in NSW/ACT reached 4.6%. 

In contrast, government-backed infrastructure projects remain resilient, buoyed by $500 billion in funding and achieving a deferral rate of 1.9%. This two-speed market underscores the stark divide between private and public investments in 2025. 

“As Australia’s construction industry grapples with a complex and evolving economic environment, the prevalence of project deferrals and abandonments continues to pose a significant challenge driven by a multitude of economic challenges, including inflation, labour shortages and high construction costs,” said Hubexo APAC President Ashleigh Porter. 

“At Hubexo, we are committed to supporting industry stakeholders with reliable insights and innovative tools to adapt to these pressures. By leveraging comprehensive data, we aim to empower developers, builders, architects and industry stakeholders to make informed decisions, mitigate risks and forge a sustainable path forward with detailed pipeline data and forecasts.” 

No relief from construction cost escalations 

Cost escalation continues to dominate industry concerns, with developers, architects and builders all grappling with tighter margins. Developers face rising material costs, while builders report delays caused by subcontractor insolvencies and prolonged lead times for materials. 

Illan Samuel, Managing Director at Samuel Property Group, said projects have faced feasibility issues in 2024 because of high construction costs and stagnant rent rates.  

“We strive to advance our pipeline while balancing ambition with practical constraints, knowing that market realities can sometimes limit progress,” Samuel said. 

Collaboration and innovative problem-solving are essential to mitigate the impacts of escalating costs, ensuring project feasibility and stability in an uncertain economic environment. 

Industry grapples with existential cost of climate inaction 

The sector’s alignment with net-zero targets is increasingly urgent, particularly within residential construction, where affordability concerns hinder sustainable practices. Industry leaders are pushing for greater awareness, collaboration and policy incentives to promote eco-friendly solutions. 

Eliza Suffren, Director at Cox Architecture said a generational shift was needed in sustainability demands non-toxic materials and eco-friendly designs in homes and offices.  

“To meet this, smart design must be prioritised from the start, making sustainability a core part of construction rather than an afterthought,” Suffren said. 

“Collaboration between architects, developers, builders and agents is key to aligning with the market’s sustainability expectations.” 

Delaying sustainable initiatives risks long-term financial and environmental consequences, with missed opportunities to capitalise on the global shift toward green construction. 

The housing crisis is rapidly reshaping Australia 

Australia’s housing crisis, exacerbated by policy misalignment and rising costs, has reached critical levels. The Federal Government’s goal of 1.2 million new homes by 2029 is hampered by high taxes, planning inefficiencies and waning investor confidence. 

Nicky Drobis, Partner and Head of Design at FK, acknowledged that tackling the current housing and construction challenges is a formidable task. 
 
“While there’s no shortage of well-intentioned policies, we’re dealing with the consequences of years of inaction, resulting in a significant housing backlog,” Drobis said. 

“Resolving this issue will be a lengthy and painful process and not everyone will be satisfied with the outcomes.” 

Streamlined planning processes, targeted incentives and public-private partnerships are pivotal to addressing the housing shortage and easing strain on Australia’s social and economic fabric. 
 

Tech arms race puts returns at risk for late adopters 

The construction industry is in the midst of a tech arms race, where early adopters are reaping substantial rewards in efficiency and profitability.  

Early adopters of AI-driven project tracking, VR design tools, and real-time collaboration platforms are reaping substantial benefits in efficiency and profitability. However, firms resistant to technology adoption risk falling behind in a fast-evolving market. 

“We view digitisation, especially AI, as revolutionary—almost as significant as the invention of fire,” David Caputo, Director at Kapitol Group, said. 

“It has the potential to make the industry more efficient, reduce errors, minimise waste and enhance sustainability. Faster builds, fewer mistakes and extended crane usage are achievable with the right technology.”  

The gap between tech-savvy firms and traditional players is widening, underscoring the need for innovation to remain competitive in 2025 and beyond. 

Want to learn more about the current state of the Australian Construction Industry? Dive deeper by downloading this year’s BCI Construction Outlook.  

AS SEEN:

• The Australian Financial Review
• The Australian
• The Urban Developer