Can Australia Build 1.2 Million Homes in 5 Years? Experts Weigh In

Just last week, the Albanese government announced an ambitious target to build 1.2 million new homes from the five years beginning July 2024.

In an effort to combat Australia’s worsening housing crisis, the new target was increased from an initial 1 million homes announced earlier this year.

But some experts and political figures have criticised the target as being downright unrealistic, while others have touted it as a tad ambitious.

Including CoreLogic’s head of research, Tim Lawless.

Mr Lawless appeared on the Fear and Greed podcast last week, calling the updated target ‘pretty aspirational’. He pointed out that in all of Australia’s history, that volume of home construction has never taken place.

“The closest Australia’s ever got to it was in the five years ending December 2019, and we built nearly 1,100,000 homes. So to my point, this is pretty aspirational and such an aspirational target comes at a time when supply is almost moving from a standing start,” said Mr Lawless.

And he’s not wrong about the ‘standing start’.

While Australia has just moved through a construction boom on the back of the HomeBuilder program, the next year is looking dismal in terms of new builds.

Approvals are currently sitting at a four year low, according to AFR.

They’ve fallen -18 percent over the year, according to ABS statistics, with June recording a slump of -7.7 percent.

As Mr Lawless puts it, the building approvals that we’re seeing now are a good reflection of the building activity we’re to see in the next year or so.

“Sure, you’ve got a lot of homes being built at the moment, but like we just talked about, the supply pipeline is really low, so we’re going to have to start seeing approvals ramping up pretty quickly in order to achieve this target over five years,” said Mr Lawless.

So what’s in the way?

It’s all well and good to suggest we need to ramp up building to reach these targets, but as Mr Lawless notes - there’s a lesson to be learnt in the supply side constraints that emerged with the HomeBuilder program, and during the pandemic.

The construction industry has been plagued by material and labour shortages over recent years, creating bottlenecks in the supply of new homes.

And these bottlenecks must be addressed before embarking on such an ambitious project.

“I think we need to be focusing a lot more on getting the foundations right and really getting a more significant skill set in place, which in itself takes a long time,” said Mr Lawless, on the Fear and Greed podcast.

“You can import that skilled migration, but I think a much better way to do it, or a complimentary way would be to be really focusing on training and trades and getting people trained up locally, domestically.”

The Housing Industry Association’s deputy managing director (industry and policy) Jocelyn Martin echoed a similar sentiment.

“Skills shortages in the industry are likely to be one of the greatest challenges. In order to support the industry to grow the workforce, there must be ongoing support for apprentices and the employers who provide on-the-job training,” said Ms Martin.

“Initiatives to attract more females to the sector, incentives to make mature-age apprentices more affordable and mentoring programs to retain apprentices are all important to support the need for skills.

Promisingly however, Ms Martin believes that the worst of the material shortages, among other barriers to home construction, are behind us.

“Supply chain capacity arose over the last few years as a result of extraordinary circumstances, disruptions to global supply chains and a huge spike in demand within a very short time frame,” said Ms Martin.

“These pressures have dissipated now and the five year horizon should enable supply chains to adjust and build confidence among suppliers.”

Ms Martin also added that reforms to taxes, access to cheaper land, reliable policy settings, and an overhaul of some banking processes would aid in achieving the ambitious housing targets.

She notes that while it’s entirely possible, building the homes will require a collaborative approach between local, state and federal government.

Evidently, a whole range of underlying issues need to be prioritised to aid the construction industry in achieving these ambitious targets, but as Ms Martin says - “ambition is the path to success.”