TL;DR: (Too long, didn’t read)
Building costs in South Africa are being pushed up in 2026 by materials, labour, fuel and transport, compliance requirements, and interest rates. GlobalData forecasts the industry to grow by about 2.8% in real terms this year, though the recovery is uneven and, as reported by The Citizen, government underspent its three-year infrastructure allocation by R52 billion. IntelliBuild expects residential building to run between R10,000 and R20,000 per square metre in 2026, with Gauteng at around R13,330. As the real cost of a build goes up, the value a project needs to be insured for generally rises with it, on the basis its own policy wording sets. Contractors who have not reviewed their contract values in a while may want to check with their broker that their cover still matches the value the policy calls for.
Why building costs keep climbing
Ask any contractor on site and they’ll tell you the same thing. Materials cost more than they did last year, and last year they cost more than the year before.
There isn’t one single reason for this. It’s a stack of smaller pressures that all land on the same invoice.
Cement, steel, timber and electrical components are priced in a global market. When the rand weakens against the dollar, imported materials and anything with imported components get more expensive, even if nothing has changed on the local side.
Then there’s fuel. Diesel and petrol prices affect almost everything on a construction site, from running generators and machinery to transporting materials from suppliers to site. When fuel goes up, delivery costs go up, and that gets passed down the chain until it reaches the final invoice.
Labour costs are also part of the picture. Skilled tradespeople are in demand, and wage increases in the sector add to the overall cost of getting a project built.
Compliance and red tape add their own cost
Municipal approvals, building inspections, engineering sign offs and health and safety requirements all take time and money. None of this is optional on a legitimate build, but it does add to the final price tag.
Contractors dealing with multiple municipalities know this isn’t consistent either. What’s a quick approval in one district can take months in another, and delays cost money even when nobody’s actually building anything during that time.
Interest rates and slow growth
High borrowing costs make projects more expensive to fund, whether that’s a developer financing a build or a homeowner taking out a bond. When borrowing costs more, some projects get delayed, downsized or scrapped altogether.
That slower pace of activity doesn’t necessarily bring costs down. Suppliers and subcontractors still have their own overheads to cover, so pricing tends to stay firm even when the volume of work in the market softens.
A cautiously better picture for the industry
It isn’t all bad news. GlobalData forecasts South Africa’s construction industry to grow by around 2.8% in real terms in 2026, supported by investment in transport infrastructure and energy, and by spending announced in the February 2026 Budget.
The Citizen reported in June 2026 that the long downturn in construction activity may be approaching a turning point, pointing to roughly 74,000 new jobs added to the sector between the first quarters of 2025 and 2026, an increase of about 11%.
Its headline put a question mark on it, and the same report is blunt about why. Government underspent its R1 trillion three-year infrastructure allocation by R52 billion. Only a small share of the current infrastructure pipeline is made up of public-private partnerships. The recovery is uneven across provinces, held back by implementation delays and weak municipal finances.
So the tone is better rather than good. A growth forecast and a real jump in employment count for something. Money that was allocated and never spent does not put work on the ground.
What building actually costs right now
Numbers help more than adjectives here. IntelliBuild’s 2026 breakdown of construction costs, published in January, expects residential building in South Africa to range broadly from about R10,000 to R20,000 per square metre, depending on the finish level, design complexity and location.
In Gauteng specifically, IntelliBuild puts the figure at around R13,330 per square metre. That’s a market expectation, not a fixed rate. A basic finish in a small town will land well below it. A high spec finish in a major metro can sit well above it.
These figures move. Materials prices, labour rates and regional demand all shift the number from one year to the next, and from one site to the next. They’re useful as a general guide, not as a quote for any specific project.
What this means when you price a job
Rising costs do not just affect the final invoice. They change how a quote holds up over time. A price worked out in January can look thin by the time the job actually starts, especially if materials are ordered months later than budgeted.
Contractors deal with this in different ways. Some build a cost allowance or escalation into longer quotes, so a rand that buys less in six months does not eat the whole margin. Some price materials closer to the start date rather than locking in early. Some keep a closer eye on the two or three inputs that move the most, usually cement, steel and fuel, since those tend to drag the rest of the budget with them.
There is no single right answer, and every job is different. The general point is that a quote is a snapshot of costs on the day it was worked out. On a longer contract, it is worth knowing how much room there is if those costs shift before the work is done.
Why rising costs matter for your insurance too
Here’s the part that often gets missed. If it costs more to build something today than it did two years ago, then it also costs more to rebuild it if something goes wrong during construction.
Contractors All Risk cover, often called CAR cover, is built to respond to physical loss or damage to the works while a project is under construction, subject to the terms, conditions and exclusions of the specific policy. CAR policies are generally written on the basis that the amount insured reflects the project’s contract value at the time of cover, rather than the value it had when the policy was first arranged years earlier. The basis a policy uses is set out in its wording.
This matters because of a policy condition usually called average, and more plainly described as under-insurance. Where it applies, insuring a project for less than the value the policy requires can reduce a claim payment in proportion to the shortfall. A site insured for well under that figure may see a claim settled at a correspondingly reduced amount. Whether the condition applies at all, and exactly how it is worked out, depends on the wording of the policy in question.
One thing to weigh before acting on any of this: the sum insured is one of the figures a premium is worked out from, so changing it usually changes the premium as well.
As material and labour costs rise, contract values rise with them, even on a project that hasn’t changed in scope. A sum insured that made sense at the start of a build might quietly fall behind the real cost of that same build a year or two later.
It may be worth asking a broker to check that a project’s insured value still lines up with current rebuild costs, particularly on longer contracts or ones that started a while back. CivilSure works specifically in construction and engineering insurance for South African contractors, and can talk through how contract values and cover amounts relate to each other, subject to policy terms.
If it is the pricing side of the same question you are after, what a Contractors All Risk policy actually costs sets out how insurers work a premium out from contract value and turnover.
Is your contract value still current?
Costs have moved. If the sum insured on a live contract was set a while ago, it is worth a look before anything happens on site rather than after.
Sources
- GlobalData, South Africa Construction Market Analysis: globaldata.com/store/report/south-africa-construction-market-analysis
- IntelliBuild, “2026 Construction Costs Unpacked”, published 20 January 2026: intellibuild.co.za/post/2026-construction-costs-unpacked-how-much-will-your-home-really-cost
- The Citizen, “Building and construction sector poised for better days?”, 29 June 2026: citizen.co.za/business/building-and-construction-sector-poised-for-better-days
The per square metre figures are IntelliBuild’s expectations for 2026, published in January 2026, and are averages across a market rather than a rate for any particular build. The 2.8% growth figure is GlobalData’s real terms forecast for 2026. The job numbers, the R52 billion underspend and the uneven recovery are as reported by The Citizen in June 2026. All of these move, so the position for any specific project is best confirmed at the time.
Common questions
Why do building costs in South Africa vary so much by region?
Labour rates, transport distances, local demand and municipal requirements all differ by region. A build in a major metro often costs more per square metre than the same build in a smaller town.
Is R13,330 per square metre a fixed price for building in Gauteng?
No. It is an average figure IntelliBuild expects for Gauteng in 2026, published in January 2026. Actual costs depend on finish level, design, site conditions and the specific contractor’s pricing.
What is the average clause in construction insurance?
Average, also called under-insurance, is a policy condition that can reduce a claim payment in proportion to any shortfall where a project has been insured for less than the value the policy requires it to be insured for. Whether it applies, and how it is calculated, is set by the wording of the specific policy. Note too that the sum insured is one of the inputs a premium is worked out from.
How often should a contract value be reviewed for insurance purposes?
Many contractors choose to review this whenever material or labour costs shift noticeably, or at renewal, so the insured value keeps pace with the real cost of the project. Your broker can advise on what suits your own contracts.
Does Contractors All Risk cover every type of loss on site?
No. Cover responds to physical loss or damage to the works as defined in the policy, and exclusions, conditions and limits apply. The specific policy wording sets out what is and isn’t included.
Is the construction industry actually recovering in 2026?
The signals are mixed. GlobalData forecasts around 2.8% real growth for 2026 and the sector added roughly 74,000 jobs between the first quarters of 2025 and 2026. Against that, government underspent its three-year infrastructure allocation by R52 billion and the recovery is uneven across provinces.
