Real State - Home building to rebound

The number of homes commencing construction in Australia is set to increase over the next few years, driven by strong population growth, low unemployment, and falling interest rates. However, long-term structural issues continue to pose risks to housing affordability and national supply targets, according to the latest outlook from the Housing Industry Association.

HIA Chief Economist Tim Reardon said the sector is showing signs of improved confidence following a period of weak activity, particularly in apartment construction.

“We expect new home commencements to increase steadily through the second half of the decade,” said Mr Reardon.

“Detached house building will lead this recovery, peaking in 2027, with apartment construction set to follow as market conditions and policy settings improve.”

Recent interest rate cuts and historically strong migration are adding to demand for new housing. But ongoing constraints including land shortages, regulations and taxes are increasing the cost of construction and limiting supply. This will continue to drive up the cost of both renting and buying a home.

“The only way to close the growing gap between supply and demand is through meaningful reform—particularly at the state level.”

The HIA report forecasts that home building will fall 20 per cent short of the Australian Government’s target of 1.2 million new homes over the five years.

“We need to unlock land, streamline planning processes, and remove barriers to investment if we are to meet the housing needs of a growing population,” Mr Reardon said.

“Australia has the capacity to deliver, but it will take a coordinated response from all three tiers of government to overcome these constraints.”

While detached housing is showing strong growth in Western Australia, South Australia, and Queensland, activity remains subdued in New South Wales and Victoria. Apartment construction is yet to recover from a collapse in foreign capital caused by punitive state taxes and is expected to rebuild gradually towards the end of the decade. This growth will be boosted by ongoing demand from migration and Olympic focused building in Brisbane.

“Housing demand is not going to decline with a rise in interest rates. It is continuing to grow along with the population. Structural reforms are needed now to shape affordability, economic opportunity and living standards for the next generation,” concluded Mr Reardon.