Canberra’s Construction Market in 2025: Stabilising Activity, Intensifying Pressures, and a Shifting Cost Outlook

Canberra’s construction sector in 2025 sits at a crucial inflection point. After several years marked by fluctuating approvals, volatile labour demand and variable contractor appetite, the market has now stabilised at a strong but changing level of activity. The Australian Construction Market Conditions Report (November 2025) provides a detailed view of the ACT’s current trajectory, revealing a market shaped by government-driven investment, evolving cost pressures and a shifting competitive landscape for labour and materials .

This article synthesises those findings, examining the drivers shaping the ACT’s construction environment and the implications for contractors, consultants, developers and policymakers over the 2025–2028 period.

A Market Stabilising After Volatility

Recent years have seen Canberra’s approvals and activity fluctuate, with the market experiencing both strong peaks and sudden contractions. According to the report, construction activity has now stabilised at a strong level, indicating improved conditions overall . This stabilisation is a significant shift from the uncertainty that characterised the period from late 2023 to early 2025.

However, the stabilisation masks complex underlying dynamics. Approvals have “continued their downward trend since the mid-late 2010s,” despite a modest rebound from the lows of late 2024 and early 2025 . This suggests that while existing projects are sustaining activity, new project inflow is less dependable. Developers remain cautious, facing feasibility challenges exacerbated by elevated labour costs and softening margins.

The stabilisation of activity appears driven less by private-sector momentum and more by government-led project cycles, which remain the backbone of the ACT’s pipeline.

Government Investment as the Market’s Anchor

The ACT has always been a government-centric construction market, but 2025 sees an even stronger reliance on public investment. The report notes that ACT and federal government projects—particularly in education, health and defence—continue to drive the bulk of construction demand, shaping both the pipeline and competitive dynamics within the market .

Major public works are attracting increased tendering interest, reversing the contractor reluctance observed in prior years. Where large projects once received limited and non-competitive bids, contractors are now demonstrating a renewed willingness to engage, signalling improving confidence and availability within the builder market.

This renewed engagement is partly the result of softening market conditions in other jurisdictions, particularly Sydney and Melbourne, where contractors may be more willing to pursue Canberra projects to secure workflow.

 Labour Market Weakness: A Growing Strategic Concern 

While the pipeline of government work is robust, labour market data paints a more concerning picture. The report highlights that job vacancies have fallen sharply, now returning to levels last seen during the early-mid 2010s trough .

This decline in construction labour demand can be interpreted in several ways:

(a) Market softening outside government-led work

Private development momentum remains subdued, particularly in detached housing, where affordability constraints have limited project viability.

(b) Reduced competition and workforce mobility

Contractors may be reluctant to over-extend, particularly when dealing with thinning margins and complex risk profiles.

(c) Impending interstate and regional competition

The Riverina region west of the ACT is expected to see major defence, renewables and transmission projects roll out. These may draw skilled labour away from Canberra, further tightening the local labour pool and potentially increasing labour costs over the forecast period .

The combination of declining vacancies and higher labour mobility risk means Canberra could face labour shortages precisely when demand stabilises and begins to rise, creating upward pressure on escalation.

 Escalation Outlook: Slow Rise Today, Stronger Growth Through 2028 

The ACT’s escalation trajectory is unique when compared to other Australian capitals. The report forecasts building escalation of 3.0% in 2025, rising to 3.5% in both 2027 and 2028, indicating a steady but moderate upward trend . Infrastructure escalation, by contrast, lifts sharply from 4.5% in 2027 to 7.0% by 2028, reflecting heavy competition from defence and regional NSW projects toward the end of the period.

Several cost drivers explain this pattern:

(a) Labour: Canberra’s primary escalation driver

Labour costs remain the most acute pressure point in the ACT. Skilled trades and site supervisors have recorded wage increases of up to 15% over the past year, particularly in bricklaying and formwork—essential trades for both public and residential projects .

(b) Materials: Mixed cost environment

Material costs in Canberra show a differentiated trend:

• Bricks are steadily increasing in cost.
• Structural steel has stabilised but remains high.
• Plasterboard, timber and concrete have become more competitively priced.
  The mix suggests that while global supply pressures are softening, localised demand spikes—particularly in education and defence projects—will keep some categories elevated.

(c) Margins softening

Main contractor margins have “softened slightly,” reflecting competition for work and limited ability to pass costs on to clients. Over the medium term, this may limit contractor willingness to take on complex, high-risk projects without premium pricing.

Residential Sector: Tentative Rebound but Constraints Persist

The ACT’s residential construction sector has experienced prolonged volatility. The report notes that while there has been a modest rebound in indicators such as funding for new residential and commercial projects, construction demand remains fragile .

Attached housing shows stronger prospects than detached homes. Detached housing continues to face affordability and feasibility constraints, exacerbated by:

• high labour costs
• strict planning processes
• rising material prices for brick and structural components

This results in a residential market that is recovering, but unevenly, with growth largely dependent on small-scale developers and medium-density infill.

 Competitive Landscape: Strengthening Rival Markets Put Pressure on ACT Capacity 

Geography plays a strategic role in Canberra’s construction market. While the ACT is often viewed as a relatively isolated jurisdiction, it is increasingly influenced by dynamics in surrounding regions:

• Regional NSW to the west (Riverina) is positioned for a surge in defence and renewables projects.
• NSW South Coast and Southern Tablelands also present growing demand for trades.
• Canberra’s labour pool is smaller and more specialised, making it sensitive to interstate movements.

This competitive environment raises the risk that Canberra may struggle to secure the resources it needs as activity rises—particularly in infrastructure. 

 Outlook to 2028: A Market Poised for Gradual Tightening 

The report positions Canberra as a market that is stable today but likely to tighten steadily through 2027–2028. With government projects continuing to dominate the pipeline and material/labour pressures re-emerging, the ACT is expected to experience:

• moderate annual escalation
• increasing competition for trades
• softer contractor margins
• stronger activity in education, health, defence and attached housing
• rising delivery risk on government infrastructure commitments

The ACT remains one of Australia’s more predictable construction markets, but predictability does not equate to ease. Stakeholders must prepare for a “slow burn” escalation cycle that gradually intensifies, particularly for infrastructure, as regional competition amplifies.

Conclusion

Canberra’s construction market in 2025 is defined by stability, government-driven demand and emerging cost pressures. While private-sector momentum remains subdued, a robust public pipeline provides confidence and continuity. Labour costs continue to shape the escalation picture, and competition from surrounding regions presents a growing challenge. As the ACT moves toward 2028, stakeholders should anticipate a steadily tightening market, rising infrastructure escalation, and increased pressure on project feasibility.

Overall, the ACT enters its next construction cycle with solid foundations but clear challenges—making strategic planning, risk management and market intelligence more critical than ever.

If you'd like to read the full report, it's available to download via this link: