As the issue of housing has emerged as one of the key battlegrounds in the upcoming Federal election, new figures show the supply of new homes in Australia has slowed.
Worryingly, the Building Activity figures from the Australian Bureau of Statistics show 2024 was the weakest calendar year for starts for higher-density homes like apartments and townhouses since 2011.
The figures show just how far Australia is falling behind in the quest to meet the Federal government’s target of building 1.2 million homes over 5 years
The slowing home build rate comes as new figures show net overseas migration appears to have accelerated again in the first two months of 2025, putting even more pressure on the already overstretched housing market.
The details
New data from the Bureau of Statistics shows the total number of homes where building commenced fell 4.4% in the last three months of 2024 to 41,911 dwellings on a seasonally adjusted basis.
House commencements fell 6.1% to 26,136 dwellings, while the “New Private Sector Other Residential” category (which includes apartments, townhouses and other higher-density homes) fell 5.6% to 14,196 dwellings.
“Home building just got slower,” was how the Financial Review newspaper headlined its story on the grim figures.
“The latest Building Activity data…reveals that the Housing Accord target remains out of reach,” says independent housing analyst Cameron Kusher.
“The target of 1.2 million homes over five years (for which we now have the first six months of data) equates to 240,000 new dwellings a year, 120,000 new dwellings each six-month period and 60,000 new dwellings each quarter,” he says.
On that basis, less than 70% of the homes that needed to be commenced in the December quarter of 2024 were started.
“The Housing Accord target is based on completions,” Mr Kusher says, “but in order to complete these dwellings you need to start building them.”
Master Builders Australia's Chief Economist, Shane Garrett, highlighted the falling commencement rate for higher-density home builds.
“Higher-density home building has been stuck at a low ebb for years, and the insufficient output of new stock here is a major culprit when it comes to deteriorating affordability in the rental market,” he says.
“The performance of higher-density home building will be pivotal in determining whether or not we meet our Housing Accord targets.
“Today’s figures show that the struggle has got even tougher on this front,” he says.
Independent housing analyst Cameron Kusher points out that things are not much brighter when it comes to the actual number of completed homes.
“90,136 new dwellings were completed over the final six months of 2024 which was -24.9% compared to the Housing Accord target of 120,000 over that period,” he says.
On one of the other main measurements of Building Activity - dwelling approvals - Cameron Kusher says it’s clear there is “a heightened volume of projects approved but not commenced, which is most likely due to trade shortages and possibly some projects having issues with their final funding.”
Mr Kusher says that he expects to see commencements start to lift later this year when interest rates are cut and more new projects become viable.
“When interest rates are reduced, it typically does lead to an increase in home building and we know that the cost of finance is a major barrier for many developers.”
However, with Australia already experiencing an estimated shortfall of between 200,000 and 300,000 homes, Leith Van Onselen, the Chief Economist at MB Fund and MB Super and the co-founder of the MacroBusiness newsletter, indicated the housing crisis was likely to get worse before it gets better.
“The immediate outlook is poor,” Mr Van Onselen says, “given that net overseas migration appears to have accelerated in the first two months of 2025.”
“155,000 net permanent and long-term arrivals landed in Australia in January and February 2025, the second-highest number on record and only a smidgen below last year’s record of 161,000 for the same period,” he says.
“Australian housing will remain in shortage so long as population demand via immigration continues to exceed supply.”