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Australia is grappling with an increasingly severe housing crisis as rising interest rates and skyrocketing construction costs stifle the supply of new homes.
Experts fear that the national goal of constructing 1.2 million new homes over the next five years will remain out of reach.
Issues such as high construction costs have accelerated the cost of building in major cities at a rate that outpaces property price growth. It increasingly appears more financially sound to purchase an existing home rather than build a new one.
According to Tim Lawless, CoreLogic's research director, "the cost of construction is yet to decline and it remains approximately 30% more expensive to build or renovate now compared to pre-COVID times," reflecting a prolonged period of inflating expenses.
SQM Research's founder and managing director, Louis Christopher, has expressed concern. He pointed out that "indicators show no signs of an imminent increase in housing supply," and has projected that there will be only "138,000 new dwellings completed by FY25."
PropTrack's executive manager for economic research, Cameron Kusher, noted, "Building approvals have plunged to their lowest in a decade. The pandemic-induced rise in construction costs, labour shortages, and 12-year high interest rates have severely impacted new constructions."
Adding to the discourse, Ben Burston, chief economist at Knight Frank, warned that "restoring high levels of housing construction will be a laborious task" due to the steep increments in both construction and financing costs.
The Australian Bureau of Statistics (ABS) revealed that only 163,800 homes were approved for construction in the year up to May. This is 32% (or 76,200 homes) short of the Albanese government’s 240,000 annual housing target.
It is crucial to note that the Albanese government’s target of 240,000 homes annually is unprecedented. The closest the nation came to meeting such a goal was in 2017 when 223,600 homes were built, which was still 7% below the target. This was achieved with a cash rate of 1.5%, compared to the current rate of 4.35%.
Back in 2017, builders also faced lower construction costs (some 40% less than today) and did not compete for labour with state government infrastructure projects. In comparison, data from the Australian Securities and Investments Commission (ASIC) show that nearly 3,000 construction firms went bankrupt in the 2023-2024 financial year, reducing the sector’s productive capacity.
Given these macroeconomic conditions, it seems highly improbable for the Albanese government’s housing targets to be met, and dwelling completion rates are likely to remain low in the near term.
Ultimately, a long-term resolution to Australia’s housing shortage may necessitate reducing net overseas migration, hence easing the population demand below the nation’s housing and infrastructure supply capacity.
If these structural issues aren't addressed, Australia's housing crisis is poised to exacerbate.
The Australian stock market witnessed a downturn on Tuesday as the Reserve Bank of Australia (RBA) opted to leave interest rates unchanged, while cautioning about the potential for persistent inflation beyond the preferred range. The ASX 200 dropped by 81.1 points, or 0.91%, closing at 8813.7. Meanwhile, the All Ordinaries index similarly decreased by 84.3 points, or 0.92%, settling at 9098.2. - read more
The introduction of the Albanese government's 5% deposit scheme for first home buyers at the start of October has led to a noticeable uptick in housing prices. According to Cotality’s latest data, October saw the strongest rise in house prices since June 2023, with a 1.1% increase that equates to a 2.9% rise over the quarter in Australia's major cities. - read more
Austal Limited, a leading Australian shipbuilder, has secured a substantial $100 million loan from Export Finance Australia (EFA) to bolster its shipbuilding operations in Mobile, Alabama. This strategic funding is earmarked for the development of the Final Assembly 2 (FA2) project, a significant initiative aimed at enhancing Austal's capacity to construct vessels for the U.S. Navy and Coast Guard. - read more
Marinex Underwriting, a newly established marine underwriting agency, has officially launched in the Australian market, aiming to address the complex insurance needs of the marine sector. Backed by global specialty insurance distributor Amwins, Marinex is a shared equity agency co-founded by industry veterans Janelle Karnib, Chris Kelly, and Ainsley Smith. - read more
In a significant move to bolster its naval capabilities, Australia has officially selected Japan's New FFM design for its general purpose frigate program. This decision, announced by Defence Minister Richard Marles on August 5, 2025, marks a pivotal step in enhancing the Royal Australian Navy's operational capacity. - read more
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Yield: The income return on an investment, such as the interest or dividends received from holding a particular security.
