The last few years have seen notable shifts in costs, availability, and market conditions, all of which can affect property insurance premiums and the level of coverage you need. By understanding these factors, you can take proactive steps to review and update your sums insured, helping to avoid under-insurance and maintain effective protection.
For practical guidance on calculating sums insured and ensuring your coverage reflects today’s replacement costs, read our article: How to calculate and maintain accurate sums insured. As a reminder, it is important that your sums insured reflect the full replacement value at today’s cost (not the market value, second-hand cost, or written-down, depreciated value).
Here is a closer look at some of the key economic and market factors currently shaping property insurance:
Construction costs
Construction costs continue to influence the cost to repair or rebuild a property. According to the latest Cordell Construction Cost Index, residential building costs in Australia increased by around 2.5–2.9% over the year to late 2025, following a period of elevated costs through 2023–24. While the rate of annual cost increases has eased compared to the peak years of post‑pandemic growth, overall price levels remain high compared with historical averages. Forecasts from market analysts suggest that construction cost escalation is likely to remain elevated in 2026, reflecting ongoing pressure from labour shortages, materials cost pressures and supply‑chain factors.
Cost and availability of building materials
Material costs continue to influence the cost to repair or rebuild property. According to recent industry data, the price of key building materials (such as concrete and cement) increased by around 5.1% over the 12 months to June 2025, while timber and board prices were up modestly (around 0.9%) and metals (including copper and aluminium) grew by about 2.3% over the same period. At the same time, the cost of some materials like steel products has declined, with prices falling over the past year. These evolving material cost trends can affect overall replacement costs and timelines for repairs or rebuilding, so it is important to consider them when reviewing your sums insured.
Labour shortages
Labour availability and costs also play a significant role in construction and repair expenses. Even with Australia’s overall unemployment rate remaining relatively low, shortages of skilled tradespeople persist across the building industry. Industry data shows that the HIA Trades Availability Index (which measures the availability of skilled trades) has consistently been in negative territory in recent quarters, indicating an ongoing undersupply of workers such as carpenters, bricklayers and other construction trades. This shortage continues to put upward pressure on labour costs, extend project timelines and influence the cost of repairing or rebuilding property.
Supply chain disruptions
Global and local transport disruptions have affected the availability of goods, contributing to longer delivery times and historically elevated freight costs. While container shipping rates have eased from the extreme peaks seen during the pandemic, they remain significantly higher than pre-COVID levels in many markets, adding to the cost of imported materials and goods.
Inflation
Even though headline inflation has moderated compared with the pandemic period (with the latest figures showing CPI at 3.8% in the 12 months to December 2025), cost pressures remain elevated for key areas such as construction materials, energy and services. These ongoing increases continue to influence replacement values and can erode the value of existing insurance coverage.
Natural disasters
Extreme weather events can increase demand for materials and labour, pushing up repair and rebuild costs in affected areas. These events reinforce the need for accurate sums insured to ensure coverage reflects current replacement costs.
Rising interest rates
The Reserve Bank of Australia lifted the official cash rate as part of its ongoing response to inflationary pressures. Most recently, the RBA increased the cash rate to 3.85 per cent. Higher financing costs flow through to borrowing, property values and replacement costs, which can in turn affect sums insured and the cost of restoring or replacing assets.
Global conflicts
Ongoing geopolitical tensions and regional instability continue to create volatility across commodity and freight markets. Disruptions to major trade corridors and key producing regions have affected the availability of essential commodities such as energy, agricultural products, and industrial metals, contributing to price fluctuations and market uncertainty. Instability along critical shipping routes has also impacted global logistics networks. Vessel rerouting, heightened security concerns, and increased marine insurance costs have extended transit times and raised freight expenses, placing additional pressure on the cost of imported goods and raw materials worldwide.
What this means for policyholders
All these factors contribute to higher replacement costs for buildings, contents, and other insured assets. For property owners and businesses, it highlights the importance of:
- Reviewing and updating sums insured to reflect current costs and market conditions.
- Considering the impact of supply chain and labour constraints on rebuild timelines.
- Planning for replacement costs that may be higher than historical or purchase values.
By understanding these market influences, businesses and individuals can make informed insurance decisions, avoid under-insurance, and ensure their cover is sufficient to protect against unexpected losses.
