Key takeaways
Both major political parties (Coalition and Labor) are offering short-term, politically popular solutions that fail to address the underlying issues.
The core problem remains insufficient new housing construction rather than purely affordability or financing methods.
Despite the government's push to boost housing supply through incentives and reducing red tape, current market conditions don't support substantial construction activity.
Developers face high costs, limited demand, and insufficient economic incentives to build at scale.
Realistically, the industry would need multiple economic factors to align—lower interest rates, rising property prices, stabilising or falling building costs, increased borrowing capacities, and high demand for new builds.
February saw a slight dip in total dwelling approvals (-0.3%) mainly due to reduced unit approvals, though detached housing approvals rose for the second consecutive month.
Annual dwelling approvals have increased by 25.7% year-on-year, the strongest pace since mid-2021, yet overall approvals remain well below the peak levels from 2016, underscoring a persistent supply shortage.
Inflation eased slightly in February to 2.4%, down from January’s 2.5%. Underlying inflation also softened from 2.8% to 2.7%, supporting a likely interest rate cut by May.
Lower inflation was influenced significantly by government electricity subsidies, reduced fuel prices, and moderated rental increases.
Australia's housing crisis has become a fierce political battle that could have major implications for the outcome of the federal election.
The problem is there are no quick fixes to the housing crisis, yet both the Coalition and Labor continue to chase short-term solutions that don't address the real issues.
Anything easy and popular won’t work to solve housing affordability or the housing shortage—the fact is we’re just not building enough new dwellings.
In today’s Property Insider chat Dr. Andrew Wilson gives his thoughts about the latest incentives the political parties are offering which will only push up property values, as well as the recent House Building approval stats, the latest inflation data plus lots more…
Major parties’ housing promises will only push up property prices
Watch this week's property inside a video as Dr Andrew Wilson gives his thoughts on the housing initiatives proposed by the major political parties.
On the one hand, the Coalition is talking about making owner-occupier loans for first-home buyers tax-deductible (which would be a game-changer).
Labor is proposing to allow first-home buyers to purchase homes with just a 5% deposit on properties worth up to $1.5 million.
Their scheme will not have income caps or limits on the number of places available.
Add to that shared equity schemes, and you’ve got a bit of a government-led property-buying buffet.
But here’s the rub—while we keep hearing about plans to boost housing supply by encouraging new construction, cutting red tape, and offering development incentives, those ideas are still mostly wishful thinking.
Developers are struggling to make the numbers work right now
The costs are too high, demand isn’t where it needs to be, and the current market just doesn’t support large-scale building the way we need.
Realistically?
For the new build sector to fire up, we’d need a lot to fall into place: multiple interest rate cuts, rising property values, increased borrowing power, and building costs to not only stabilise but ideally drop.
Oh, and we’d also need buyers to be desperate for new properties over older ones. Not exactly a quick fix.
Now, here’s where things get a bit sharper.
If the government rolls out all these pro-property ownership policies, they’re likely to push prices even higher.
That’s great if you already own or jump in now, but it’s bad news for anyone still years away from buying—or stuck renting.
Essentially, the more generous the policy, the more it supercharges demand and pricing, which ends up hurting those who are just trying to get in.
And if that wasn’t enough action, the markets got a jolt last week from the whole Trump trade saga.
It sent waves through financial markets and actually brought down interest rate expectations.
Uncertainty like that often makes residential property more attractive - people see bricks and mortar as a safe bet.
- Also read:Adelaide housing market update | April 2025
- Also read:Rental vacancy rates tighten once more ahead of the holiday season | SQM Research
- Also read:Brisbane housing market update | April 2025
- Also read:Housing Affordability: Policies That Could Backfire | Property Insiders
- Also read:Sydney housing market update | April 2025
Here’s the kicker: markets are now pricing in interest rates dropping to around 2.8% by December 2025.
That’s about 1.5% lower than where they are now.
And if APRA eases up and cuts the assessment buffer from 3% to 2 or 2.5%, we could see a 20–25% boost in what people can borrow.
In a market where everyone’s already stretching themselves to borrow as much as possible, that would pour fuel on the fire.
We’re not building enough dwellings
Watch this week’s property insider video as Dr. Andrew Wilson and I discuss how while the medium-term trend is rising building approvals, total dwelling approvals declined 0.3% in February, due to a fall in private unit approvals.
On the other hand house building approvals rose for a second consecutive month, reversing some of the weakness in late 2024.
Despite the monthly dip, annually, approvals rose 25.7%yr – the strongest annual pace since mid-2021.
The monthly drop in unit approvals was almost entirely due to a sharp decline in high-rise approvals, centred on NSW – the main drivers of gains over the previous two months.
However, the following chart shows how building approvals are significantly below the 2016 peak which is part of the reason why there is such a shortage of housing supply.
Inflation is heading in the right direction
Watch this week’s Property Insiders chat as Dr. Andrew Wilson explains have February’s headline inflation fell to 2.4% compared to January's 2.5%
Underlying annual inflation also fell from 2.8% to 2.7% - and all this points to a likely interest rate fall in May
Headline inflation results were impacted by the Government electricity subsidy – down from an annual fall of 11.5% over January to a fall of 13.2%.
Fuel prices were also lower compared to the previous month, and rents improved again from an annual rise of 5.8% over January to 5.5% over February.
Auction clearance rates ease under weight of Super Saturday auctions surge
Watch this week’s Property Insider chat as Dr. Andrew Wilson explains how auction clearance rates were generally lower in most capitals over the past week, reflecting more choices for buyers and more competition for sellers from the usual surge in listings over the pre-Easter Super Saturday of auctions.
The national auction clearance rate dipped to 58.7% amid the Super Saturday listing surge.
Sydney and Melbourne clearance rates fell slightly despite higher auction volumes.
The market is expected to quieten due to the Easter-Anzac break and the upcoming Federal Election.
