Think We’re Building Enough Homes? Think Again

Is Australia on track to meet its housing goals?

Well, the latest data says...not quite.

According to the latest PropTrack New Homes Report (January 2025), while there's been some progress, we’re still falling short of the ambitious 1.2 million new homes target set under the National Housing Accord.

Karen Dellow, Senior Data Analyst at PropTrack,  said the numbers tell the story:

"New home approvals have been increasing since March 2024, but they remain below the levels needed to hit the federal government’s goal of building 1.2 million homes by mid-2029.

To be on track, approvals need to average 20,000 per month, yet they’ve been sitting at around 14,800 per month since July 2024. That’s a significant shortfall, despite a modest 2% increase in monthly approvals."

So, what’s really holding back the new housing supply?

Let’s dive in.

A struggling construction sector

The construction industry isn’t what it used to be.

Over the past five years, the number of builders in Australia has declined, meaning there are simply fewer businesses capable of delivering homes at scale.

And even for those still operating, the cost of materials remains stubbornly high.

The post-pandemic surge in prices for metals, bricks, plumbing, and ceramic materials has made construction more expensive than ever.

At the same time, skilled labour shortages are driving up wages, further squeezing developers’ profit margins.

Ms Dellow explained:

"This is why we’re seeing a record-high backlog of projects, with over $70 billion worth of residential construction work yet to be completed since late 2022.

Developers are still working through these delays, making it difficult to take on new projects at the pace needed."

The rising cost of new homes

Even when new homes are being built, they’re often not the affordable options that many Australians need.

According to PropTrack’s data, there has been a shift towards larger, more expensive developments.

Why?

Because higher construction costs mean developers need to price homes at a premium to make a profit.

The numbers are striking.

In December 2024:

• 60% of new apartment listings were priced at $800,000 or higher (up from 40% just two years ago).
• High-density, affordable apartment developments have become less financially viable.
• Luxury and high-end homes are dominating new projects, especially in capital cities.

Ms Dellow further explained:

"This trend is locking out first-home buyers and middle-income earners who simply can’t afford to enter the market.

It’s a significant challenge for affordability and long-term housing supply."

A surge in listings, but not enough to solve the problem

There’s some good news.

The number of project listings on realestate.com.au has risen by 5% compared to the previous year.

Victoria and New South Wales are leading this growth, with new house-and-land projects in key suburban growth corridors.

Ms Dellow said:

"Retirement living projects are increasing, particularly in VIC, NSW, and QLD.

But even with Australia’s rapidly aging population, these developments are still in surprisingly low numbers, indicating a growing need for more targeted housing solutions for retirees."

What needs to happen next?

If Australia wants to meet its target of 1.2 million homes, policymakers, developers, and the construction industry must find solutions quickly.

Some key changes could include:

• Fast-tracking development approvals to remove bureaucratic delays.
• Incentivising smaller, affordable housing projects rather than just large-scale luxury developments.
• Providing better support for builders to encourage new entrants into the industry.
• Addressing labour shortages by training more skilled tradespeople and expanding migration programs for construction workers.

Final thoughts

While new home approvals are trending in the right direction, they’re still falling short of what’s needed to meet Australia’s future housing demands.

With affordability pressures mounting and construction delays persisting, it’s going to take a coordinated effort to ensure Australians have access to enough homes at the right price points.

If the pace of approvals doesn’t accelerate, we may face an even deeper housing supply crunch in the coming years and that’s not a scenario anyone wants.

About Dorian Traill At Metropole, Dorian helps develop a tailored, individualised wealth plan specifically for the client’s circumstances. A wealth plan is a client’s road map to a successful financial future and with professional expertise and guidance, clients can unlock the full potential of their assets to achieve their financial freedom at retirement.