However, beneath the headline decline, pressure points, including statutory charges, planning constraints, and delivery bottlenecks, are intensifying across greenfield development areas, according to Colliers Engineering & Design’s 2026 Cost Per Lot Report.
We spoke to Colliers Director of Engineering & Design, Chris Gallaugher, about what is driving cost movements across Victoria’s greenfield markets.
Costs Ease at the Margins
The report draws on cost data from approximately 10,000 residential lots across Victoria’s key growth areas, including Cardinia, Casey, Greater Geelong, Hume, Melton, Mitchell, Whittlesea and Wyndham.
It shows the average total cost per lot declined to $126,811 in 2025, down from $132,535 in 2024 - a 4.3% year-on-year reduction.
Softer construction activity has increased competition among contractors, placing downward pressure on civil works, where costs fell 6.8%.
A key contributor to cost variation is also geography, with rocky subgrades in Melbourne’s north and west inflating drainage, sewer and earthworks costs by around 20% compared to more favourable clay-based conditions in the south-east.
“Lot delivery costs eased by around 4-5 per cent in 2025, largely due to softer civil construction pricing as development activity remained well below long run averages,” Mr Gallaugher said.
“With fewer projects coming to market, competition among contractors intensified, placing downward pressure on build costs.”
Charges and Constraints Erode Gains
Despite easing construction costs, statutory charges continue to rise, increasing 18.8% year-on-year to around $51,000 per lot - or roughly 40% of total development costs.
Mr Gallaugher said these charges are now a fixed part of feasibility assessments across Melbourne’s growth areas.
“They are part of the baseline cost of doing business,” he said.
Beyond direct fees, developers are also facing broader system constraints that are extending delivery timelines and increasing holding costs.
Planning bottlenecks within Precinct Structure Plan (PSP) staging frameworks, alongside infrastructure delivery delays, are slowing project rollout.
The next layer of pressure is coming through infrastructure scheme updates.
“After years of minimal change, Melbourne Water Development Services Scheme reviews are being updated to reflect today’s construction costs and land values,” he said.
“This is leading to sharp increases in some drainage contributions, in some cases approaching $500,000 per net developable hectare.”
Costs Set to Accelerate
Looking ahead, Mr Gallaugher warned fuel price volatility linked to global supply risks could trigger a temporary spike in construction costs.
“Even brief increases matter, as many statutory charges are indexed to road and bridge construction indices, meaning short term shocks can permanently lift contributions,” he said.
Beyond that, the key driver would be demand.
“Sustained upward pressure on construction costs won’t return until greenfield activity normalises and capacity tightens,” he said.
“If demand recovers over the next 12 to 18 months, we expect steady, predictable cost growth of around 3-6 per cent per year, a sign of a healthier and more sustainable development market.”
