The latest official data from the Australian Bureau of Statistics shows that it now costs more than  $500,000 to build the average house in Australia and that doesn’t include buying the land.

Given that the price of residential land is also escalating to record price levels, the reality is that the typical house and land package in a capital city is beyond the reach of most young buyers.

The rising cost of construction, to beyond the means of many first-time buyers, is contributing substantially to the national housing crisis.

It’s a bit of a vicious circle, Australia needs to build more homes – a lot more than the industry is currently able to build – but the obscenely high cost of building both houses and apartments is the largest single barrier to achieving it.

According to the Australian Bureau of Statistics, in 2024 Australia fell 70,000 home approvals short of the target set to fix the housing crisis while at the same time home building costs hit a  new record high.

There were 170,719 homes approved in 2024, the second worst annual figure since 2012, with experts warning government efforts to address the housing crisis so far have failed to make a difference.

Making a bad situation considerably worse is the soaring cost of home sites.

The Housing Industry Association (HIA) says that surging land values are problematic for the struggling development sector, which is already battling soaring labour and materials costs.

HIA figures showed the median price of land across Greater Sydney now stands at $2,000 per sq m, that means even a tiny 300 square metre block of land costs $600,000.

Land prices are less – but still very expensive – in Melbourne, where that small block costs $320,000, and it’s similar in both Perth and Brisbane.

Those figures are based on a 300 sq m block which is really below the normal block size. In Sydney the median lot price is $710,000 compared to around $400,000 in both Melbourne and Brisbane.

Add on that typical cost for building a home – and it makes a new house on land more than $900,000 in Brisbane and Melbourne – and around $1.2 million in Sydney.

It begs the question: are politicians in government around Australia even aware that the cost of a new house on land is getting scarily close to $1 million?

Tim Graham is the Managing Director of Hotspotting and host of The Property Playbook on Ticker.