‘Waiting for a miracle’: How the cost of building a Sydney house skyrocketed to $1m

With plans for his dream home in tatters, ruined by price increases, Youssef Ajaje has had to turn to his plan B: renting, waiting and hoping.

The father of six has been saving for years and was almost ready to start building in December. But a late decision to add a basement to his plans threw everything into chaos.

“We thought it wouldn’t cost that much more, but then the war started. We changed the DA, and the delay in processing changed everything,” he said.

“Not even three weeks later, I am getting email after email, saying prices have gone up 15, 20, 30 per cent. Every week, something was going up. Now we are stuck, we are waiting on the approval for the basement and prices keep going up. It’s killing our dream.”

Building a home in Sydney has become increasingly expensive, with a rise in the cost of materials, labour and land. Fuelled by international conflicts and a worsening labour market, builders and customers are having to change their plans and budgets.

Ajaje, who owns and runs an NDIS company, couldn’t afford the price increases, and has had to change his plans.

Instead of knocking down and building his new home, he’s decided to rent it out, move into a larger rental with his family, and wait – clinging to the hope that prices will come down.

“It was around 5 per cent here and there, but it all added up to around $200,000 extra. Where am I supposed to get that from? It’s devastating, to be honest,” he said.

“We were so excited for our new home, but now we have to wait. And the funny thing is, the longer you wait, the more prices are going up.

“We are just waiting for a miracle.”

Ajaje was meant to build the house alongside his brother Hamid, who works as a construction manager. The brothers rattled off story after story of clients and friends who have had to change the scope of their projects or cancelled their builds due to price increases.

“People just don’t want to spend the money,” Hamid said. “So many people hear the prices and go ‘Nah, don’t worry about it.’ I’ve quoted three or four jobs recently where people change their minds and go from a new build to a renovation.”

Hamid says building has slowed down since the start of the Iran war, which he said in his experience had increased prices by “around 30 to 40 per cent”. He also said some customers are stretching out timelines or pausing builds because of the price increases.

“They just run out of money. Instead of finishing a job in 12 months, now some are taking 18 months. And you have to stop a job when you can’t pay the contractors, so we are all screwed,” he said.

“It now costs, on average, a million dollars to build a house in Sydney. And not a mansion or a massive home, just a normal single-storey house. Where does that leave us?”

According to data from the Housing Industry Association, construction costs have been growing in the long term, as well as spiking in the short term. Overall, house input materials have gone up by 2.5 per cent in the past year.

Key materials such as copper pipes, electrical cables, cement products and timber have all seen both annual and quarterly rises.

And that has been coupled with increasing trade and labour costs, rising at 3.5 per cent in Sydney in the last quarter, and by 2.5 per cent in the last year.

In the last 10 years, lot prices have increased by 75.3 per cent in Sydney, and construction costs have increased by 150 per cent since 2000.

Master Builders NSW executive director Matthew Pollock said he had seen construction costs grow at around double the rate of inflation, slowing the industry.

He said that price rises had been compounding since the pandemic, resulting in pressure on projects in NSW.

“It’s limiting how many new homes can go up, and is a key reason why we’re not seeing, you know, the government’s housing accord targets being met,” he said.

Pollock said consumer and business confidence had taken a hit in the past three months, adding that he had seen “builders are holding off on taking on projects because they’re not sure whether or not they can make money off them”.

“When you’ve got a high inflation environment, the cost of delivering a project is often an order of magnitude higher than the costs of the inflation that you see in the rest of the economy, and that’s what we’re really suffering with at the moment,” he said

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