Housing crisis: The alarming gap in Australia's building targets

Australia is still 40,000 new home approvals short of annual federal government targets intended to tackle the nation’s housing crisis 13 months after they were implemented.

The nation’s new home ambitions took a backwards step in July as building approvals plunged, setting up the probability that a goal of building 240,000 new homes in a year will actually take more than 15 months.

Latest Australian Bureau of Statistics data show an 8.2 per cent reduction in the number of residences given the green light compared to June, with economists warning the continued sluggishness of new home building is a factor behind the nation’s surging home prices.

Though there was a modest 1.1 per cent rise in new house approvals, it was swallowed by a bigger reduction in townhouse and apartments being given the nod.

Across the 13 months of data since the National Housing Accord’s plan to build 1.2 million homes in five years commenced on July 1, 2024, just over 200,000 new homes have been approved.

Based on the past year’s average monthly approvals it will take until mid-October to reach the first annual 240,000 approvals milestone — closer to 15.5 months.

Housing Industry Association chief economist Tim Reardon said with about 3 per cent of new houses and as much as 50 per cent of new apartments not actually being built after being approved, it was highly likely the timeline to get 240,000 new homes under construction would be considerably longer than even 15 months.

Housing construction is up year on year, but still nowhere near the levels needed to address the nation’s housing crisis.

However, last month’s economic round table has given Mr Reardon hope that by the end of the five-year timeline the nation might be commencing 240,000 new homes — with changes to the federal government’s 5 per cent deposit Home Guarantee Scheme expected to boost the number of first-home buyers considering a new purchase.

The economist added that the NSW government’s plans to guarantee sales for thousands of off-the-plan apartments was also a very positive sign for that sector, where approvals remain “volatile”.

PropTrack’s latest figures, released yesterday, showed a $47,500 (5.1 per cent) increase in the nation’s $835,000 median dwelling value.

Senior economist Eleanor Creagh said there could be a lift in new housing approvals and completions in the future, with interest rate cuts likely to boost the feasibility of new projects at a time when labour and material cost inflations were improving.

PropTrack senior economist Eleanor Creagh says rising home values around Australia could be a result of ongoing limited housing supply.

“But the pipeline of new housing remains thinner than population needs, with pre-existing cumulative undersupply that will take time to unwind,” Ms Creagh said.

“Constrained new housing supply is a factor maintaining upward pressure on prices, although the new‑build sector is moving from acute stress toward gradual repair and building approvals are moving in the right direction.”

The ABS showed that the 188,727 new homes given the nod in the 12 months to July 31, 2025, were up by about 24,000 from the same time a year ago.

Oxford Economics head of building and property forecasting Timothy Hibbert agreed that after years of undersupply for the nation’s housing market, the ongoing failure to reach the desired building approvals was one of the contributing factors for Aussie home prices surging.

However, he noted that there were positive signs emerging from governments at the state and federal level that would make more construction feasible.

Experts believe a range of key planning reform changes have put the nation in a better position to build more homes — even though approval numbers are still sluggish.

He is expecting Australia will reach 200,000 new home commencements in 2026, as these flow through, however noted that most forecasting for home prices was showing them getting stronger than had been anticipated earlier in the year.

Property Council of Australia policy and advocacy group executive Matthew Kandelaars said while the targets were still a long way off, it was important to note the nation would be in “a “far worse position today if we didn’t have the National Housing Accord targets”.

“There was always going to have to be a lot of heavy lifting and hard work done,” Mr Kandelaars said.

“But there obviously now needs to be more done.”

He said the nation’s next steps would need to be “doubling down” on what had been achieved so far.

“I would say the federal government would be optomistic on progress, but would recognise that there’s plenty of hark work ahead and I’m sure would be looking at more low-cost, high-benefit reform measures, like we have seen ouf of the economic round table, to drive our national housing supply,” Mr Kandelaars said.

The Property Council’s Matthew Kandelaars says the government needs to double down on reform achievements made so far in its bid to get more homes built.

The ABS data also shows the expected average cost of building a house around the country has risen from $469,000 a year ago to $501,000 in the latest stats.

HIA estimates have tipped that as much as $20,000 could be added to a typical build cost of a new house by National Construction Code requirements which would have impacted approvals in that timeline — particularly in Victoria.

Other factors behind the rise include some materials that are still rising in price, ongoing tightness in tradie availability and increased borrowing capacity allowing homebuyers to build bigger or better quality homes.

(Source : realestate.com.au Nathan Mawby Property journalist 2 Sep 2025)