The Australian Bureau of Statistics (ABS) reported an average value of $517,430 for new house approvals in 2025-26. That's the estimated value of building work reported for approved houses. It doesn't include the land, and it isn't a quote or a standard measure of the final cost of a completed build.
In brief: the ABS average value for house approvals in 2025-26 was $517,430, excluding land. It's a national benchmark, not a quote for your build. To estimate your own cost, compare quotes for similar homes. Divide each building price by its floor area. Apply a comparable rate to your planned floor area. Then allow separately for site works and other costs the quotes don't include.
If you're building an investment property, the build cost matters for a second reason. Your capital works deductions are worked out from the eligible part of it. So it pays to know what's in it and to keep the records.
How much does the average new house cost to build?
The best national guide is the ABS building approvals data. When a house is approved, a value for the building work is declared. The ABS reported that the average house approval in 2025-26 was $517,430. That was 5.0% higher than the 2024-25 average of $492,931.
Read that number as a starting point, not a quote. It's an average across every state and every type of house, from small project homes to large custom builds. According to the ABS methodology, the values should in concept leave out land, demolition and landscaping, and include site preparation. In practice, the value for most project homes is the contract price, which may include some site works and landscaping. The figures also include GST.
Prices are still rising. The ABS reported that new dwelling prices rose 5.4% in the 12 months to August 2026. It put the rise down to project home builders "raising base prices to pass through higher labour and materials costs". That's a price index for new dwellings, not a direct measure of what your house will cost.
What's included in the cost to build a house?
A builder's quote and the total cost of the project are rarely the same number. When you compare figures, check what each one covers.
A building contract covers the work and items set out in its scope and inclusions. Depending on the contract, that may include the slab or footings, frame, roof, walls and windows, plus the fit-out and fittings the builder specifies. Inclusions vary a lot between builders.
Costs that often sit outside the base contract, or are only partly covered, include:
- site costs, such as excavation, retaining and extra work for a sloping site or difficult soil
- connections to water, sewer, power and gas
- council, certification and design fees
- driveways, fencing and landscaping
- upgrades chosen after the contract is signed, which are usually priced as variations
The land is a separate project cost. Its purchase price isn't part of the construction expenditure used to work out capital works deductions.
What makes the cost to build go up or down?
The same floor plan can cost very different amounts on two blocks. These are the main drivers.
- Size. More floor area means more materials and labour. Cost doesn't always rise in a straight line, though. Some costs, like the kitchen and bathrooms, are fixed whatever the size.
- Design. A simple rectangular single storey house is generally cheaper per square metre than a design with many corners, a second storey or a complex roof.
- Finish. Benchtops, flooring, tapware and appliances can move the total a long way.
- The site. Slope, soil type, access for trucks and bushfire or flood requirements can all add cost before the house starts.
- Location. Labour and materials cost more in some areas. Regional or remote sites can carry extra freight and travel costs.
- The type of builder. Project home builders use set designs and buy in bulk. A custom or architect-designed build usually costs more for the same floor area.
How do you estimate your own build cost per square metre?
Cost per square metre is a simple way to compare quotes and build a rough early budget. Divide the total building price by the floor area. Use the same measure of floor area for each quote. Some builders include the garage and alfresco areas and others don't.
Here's an illustrative calculation. A $450,000 quote for a house with 200 square metres of floor area works out at $2,250 per square metre. That's an example only, not a market rate. Before you compare rates, check that each quote covers comparable work, site costs and inclusions.
Once you have a rate from comparable quotes, multiply it by your planned floor area for a rough starting estimate. Then adjust for differences in inclusions, site conditions, design and finish, and add any costs the quotes leave out. Local quotes for your own block are what count in the end.
A quote can look cheap per square metre because it leaves out site costs or uses a base level of finish.
Why does the build cost matter if it's an investment property?
When you build a rental property, the eligible construction cost is used to work out your capital works deductions. Capital works deductions let you claim the cost of the building's structure over time. These are often called Division 43 or capital works deductions, and the eligible amount is generally called construction expenditure.
Not every cost of a building project qualifies. The total you paid for the project, the builder's contract price and the eligible construction expenditure can be three different numbers.
The ATO's rules for residential rental properties include:
- For eligible residential construction that started on or after 16 September 1987, the general rate is 2.5% a year, potentially over 40 years.
- The deduction is based on the eligible construction cost, not the purchase price. The cost of the land can't be used.
- You can start claiming only once construction is completed, and only for the periods the property is used to produce income.
- Certain costs, such as general landscaping, may not be claimable as capital works.
- If you're an owner-builder, the value of your own contribution to the works doesn't form part of the construction cost used for capital works deductions.
Here's an example, assuming the eligibility requirements are met. If eligible construction expenditure is $400,000, applying the 2.5% rate gives $10,000 for a full year. That's an illustrative calculation only. Your actual claim depends on the eligible construction cost, when the property is available to rent and your own circumstances, which your accountant can confirm.
The fixtures and fittings are treated differently. Items like ovens, dishwashers, carpets and blinds are plant and equipment, under Division 40. Each eligible item has an effective life, which is a tax measure of how long the asset can be used to produce assessable income. It's used to work out the item's decline in value under the rules that apply. Since the 2017 changes, investors generally can't claim second-hand plant and equipment in a residential rental, unless an exception applies. Whether an item counts as second-hand depends on its own history, including whether it has already been used, or installed ready for use, by someone else. New assets in a new build may qualify where they meet the requirements, but it's worked out item by item. Our guide to Division 40 vs Division 43 explains the difference, and our new build vs purchased property example shows how the two compare.
What if you don't know the exact construction cost?
If you built the house, your contract, variations and invoices are the best record of the cost. Keep them, along with the plans and the occupancy or completion certificate.
If the actual construction cost can't be worked out, the ATO says you can get an estimate from "a quantity surveyor or other independent qualified person". The ATO says you can claim a deduction for the fee paid to obtain this estimate, subject to the applicable rules. Ask your accountant whether this applies to you. A quantity surveyor can estimate construction costs where the actual costs can't be established. Separately, a depreciation schedule identifies the capital works and depreciating assets. It sets out the estimates used to work out potential deductions under the rules that apply. Our guide to what a quantity surveyor does covers it in more detail.
Does building new change anything under the 2027 negative gearing rules?
It may. From 1 July 2027, negative gearing for residential property investments is generally limited to new builds, subject to exemptions and the detailed rules. The ATO's summary sets out the changes. Negative gearing generally describes an investment property whose costs are more than its rental income, creating a loss for tax purposes. Properties held before 7:30pm AEST on 12 May 2026 are generally exempt from the change. Our guide to negative gearing grandfathering covers the cut-off.
What counts as a new build matters here, and the detailed definition is still being finalised. It could change before it applies, so speak to your accountant before you rely on it for a decision to build.
The short version
- The ABS average house approval value in 2025-26 was $517,430. It covers the building only, not the land. It's a benchmark, not a quote.
- The ABS reported new dwelling prices rose 5.4% in the 12 months to August 2026. The ABS attributed the rise to project home builders raising base prices to pass through higher labour and materials costs. It's a price index, not a forecast of your build cost.
- Size, design, finish, the site, location and the type of builder all change the cost.
- Compare quotes on what they include, not just the price per square metre.
- For an investment property, capital works deductions are generally worked out from eligible construction expenditure. For eligible residential construction started on or after 16 September 1987, the general rate is 2.5% a year, subject to the rules.
- Keep your contract, variations and invoices. If the actual cost can't be worked out, a quantity surveyor can estimate it.
Get a depreciation schedule for your new build
If you're building an investment property or have just finished one, TDA can prepare a tax depreciation schedule. It covers both the capital works and the plant and equipment. You can try our calculator for an indicative estimate only, or request a quote for a schedule. You can also call us on 1300 417 317.
This article is general information only and isn't tax, financial or investment advice. TDA prepares depreciation schedules and property valuations. Speak to your accountant or adviser about your own circumstances. Information current as at 20 October 2026.
